Help to Buy: A Mixed Blessing for Homebuyers

The Institute for Fiscal Studies (IFS) has shed light on the effects of George Osborne's Help to Buy mortgage schemes, which were launched in 2013 by the Conservative-Lib Dem coalition government. The analysis reveals that higher-income households were the primary beneficiaries of these initiatives, which aimed to make homeownership more accessible during a period of rising house prices.

The Help to Buy program consisted of two distinct schemes. The first provided taxpayer-backed loans to reduce the deposit required by buyers, while the second was a mortgage guarantee scheme that covered a portion of lenders' potential losses on high loan-to-value mortgages. Both schemes applied to homes valued up to £600,000 and supported approximately one-fifth of first-time buyer purchases by 2014-15.

However, the IFS's innovative approach, utilizing survey data and local property prices, indicates that the benefits were disproportionately enjoyed by higher earners who would have eventually purchased homes without the scheme's assistance. This was particularly evident outside London and the south-east of England, where property prices were more affordable.

Bee Boileau, an IFS research economist, highlights the schemes' potential drawbacks: 'Help to Buy policies can assist first-time buyers in theory, but they can also drive up house prices and require the government to take on risks that the private sector avoids.' The analysis suggests that the schemes had the most significant impact on affordability for higher-income households.

The report further states that these individuals would typically be able to save for a minimum deposit relatively quickly, even without Help to Buy. Consequently, the schemes likely accelerated their home purchases by a few years rather than making a long-term difference in their ability to become homeowners.

The IFS analysis also reveals that the mortgage guarantee scheme had limited effects on affordability due to borrowers' income constraints. In contrast, the loan scheme was more beneficial for most households in improving the affordability of local properties but had a narrower scope, applying only to new-build properties.

The thinktank's findings suggest that the Help to Buy schemes had little impact on social mobility. Boileau proposes that future governments could target assistance towards lower-income households to address inequality, but this may require taxpayers to shoulder more risk.