Help to Buy mostly helped high earners, IFS says

A government loan scheme for first-time home buyers in England mostly helped higher earners in areas where homes are cheaper, a major think tank has said.

The Help to Buy scheme which was introduced in England in 2013 by the Conservative government also had "limited impact" on social mobility, according to the report from the Institute for Fiscal Studies (IFS).

The scheme was intended to help those without access to money via friends and family by loaning them some of the funds for a house deposit and increasing mortgage availability.

Critics say it pushed up house prices by allowing people to spend more, but defenders say it helped many people buy homes and boosted housebuilding.

The IFS report specifically focuses on the Help to Buy policies introduced in England in 2013, which comprised the mortgage guarantee scheme and the equity loan scheme.

The former increased the availability of mortgages with 5% deposits. The latter provided a government-backed 20% loan to buyers of new build properties, reducing the amount a buyer would need to borrow.

Help to Buy equity loan schemes are closed to new applicants in England and Scotland. The Welsh scheme will close in September.

There was never a similar equity loan scheme introduced in Northern Ireland.

Meanwhile, the mortgage guarantee scheme has been made permanent across the whole of the UK.

There are also a variety of other home buying schemes and support in different devolved countries.

Despite the fact that by Help to Buy's peak in 2014–15 around a fifth of first-time buyer purchases in England were supported by it, the IFS said "Help to Buy made only a limited difference to housing affordability".

The IFS's research was conducted "given calls for the reintroduction" of the loan scheme.

Its findings also echo previous criticisms from the official government watchdog.

The IFS said Help to Buy did not, as intended, help make homes affordable for many because it was limited to being used on new builds, which were "relatively rare in most areas".

In its research, the IFS also showed that the more a buyer earned, the more the scheme helped, meaning higher-income individuals gained most.

It said it "increased maximum affordable prices most among those who could already afford higher prices".

The IFS's research found that people in the early 2010s were constrained by income-based limits on mortgage lending, so the loaned deposit had a "limited effect" on housing affordability for scheme participants who often got help from friends and family at the last minute.