It’s not often the Government goes out of its way to tell people that one of its policies hasn’t been a runaway success, but that’s precisely what seems to be happening today with Help to Buy. The Treasury has published the first figures on the take-up of the controversial mortgage guarantee bit of the Help to Buy scheme, and is at pains to point out how small those numbers are.
A “mere” 7,313 properties have been bought using the mortgage guarantee scheme since it started up in October, only 1.2% of total transactions. The average property bought under the scheme was worth only £151, 597. And the vast majority of these purchases have been outside London and the South East. To put this in perspective, more guarantees were issued in Orkney than in Camden and Westminster put together; and the biggest “hotspot” for the scheme was Leeds, where it was used 116 times in its first six months.
When the Treasury unveiled the Help to Buy scheme last spring, the Chancellor was adamant that, unlike previous attempts to kickstart housing activity, this one would have far better take-up (hence the high £600,000 threshold for eligible properties). So why the reticence about its use now?
In large part it comes down to public opinion about the housing market. There are widespread concerns about the existence of a bubble in British property – most specifically in London. Whereas this time last year the Chancellor’s main concern was the threat of a triple-dip recession, today he is more worried about being seen as responsible for another property crash.
Which is why the Treasury is at pains to point out that the scheme is hardly being used at all in London; and that only a fraction of the total (31 or 7313) applications were for properties worth between £500k and £600k.
But, to get back to the original point, is the impact of the scheme as small as comes across from the Treasury’s press release? Not necessarily. For one thing, if you look at the numbers on a six-monthly basis, as the Treasury does, this underplays the acceleration in recent months. In its first quarter the mortgage guarantee scheme accounted for a mere 0.3% of property transactions, but in its second quarter, from January to March this year, it accounted for 2%. And the usage is rising quite quickly.
As it happens, it’s already far more popular than the Thatcher government’s famous Right to Buy scheme, which enabled council tenants to purchase their homes, was in its first six months. There were 2,328 homes sold in England under Right to Buy in the scheme’s first six months, from October 1980 to the spring of 1981 (see table 671 here). The Help to Buy mortgage guarantee scheme, by contrast, has been responsible for 5,890 sales in England in its first six months. Add on the new-build element of the scheme and the total comes to around 20,000 (or 16,000 if you just take the first six months of that new-build scheme, which began earlier than the mortgage guarantee element).
Now, that 20,000 rate is considerably lower than the 52,000 properties per six months rate the Right to Buy scheme achieved in its second year of operation. And it should be noted that while the Help to Buy mortgage guarantee scheme’s numbers are still rising, the new-build scheme’s popularity seems to have plateaued in recent months. All the same, the point remains that Help to Buy is already proving itself to be an extraordinarily powerful, popular, widespread policy, whatever the Government would have you believe.