The wealthy families cashing in on help-to-buy
When George Osborne announced the Help-to-buy scheme, we understood it was meant to help young people finally get the cash they desperately needed to get onto the housing ladder. Now we discover it has been used to help wealthy couples cash in on property.
The scheme comes in two varieties. The first is the 'equity loan' designed to help people who have saved a 5% deposit, and cannot find a lender to provide a loan for the other 95% of the value of their property. The idea was that those on lower incomes who were struggling to save a larger deposit, could borrow 20% from the government. The second variety is a 'mortgage guarantee', which enables lenders to purchase a guarantee on mortgages with a high loan-to-value - to encourage them to provide more 95% and 90% mortgages.
Boasting
When it released the official figures, the government was keen to draw attention to the fact that around half of all the equity loans went to households with a combined income of £40,000 or less. Osborne boasted: "This government is committed to helping people achieve the aspiration of buying their own home, and our Help to Buy schemes have now helped nearly 120,000 working people across the UK do just that."
However, official figures on who has bought houses through the scheme reveal that 1,758 couples earning over £100,000 a year took advantage. To add insult to injury, almost 500 of them already owned a property, so this was a chance to pick up a place for their jaunts to the country, or cash in on the boom. And they weren't buying typical first-time buyer homes - 804 of the properties bought under both schemes were worth more than £500,000. Meanwhile, 1,541 people on more than £100,000 took advantage of the mortgage guarantee scheme - so that overall more than 3,000 wealthy couples cashed in.
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Should we be worried?
The figures involved are comparatively small, because while 1,758 of the homes bought under the equity loan scheme went to couples who earned over £100,000, £14,036 went to those earning between £30,000 and £40,000 - the typical household income - 9,706 went to those earning £20,000-£30,000 and 1,718 went to people making less than this. You could argue that the support for higher earners is too small to worry about.
Alternatively you could ask how on earth this could be allowed to happen. In an environment when the government feels it can justify massive cuts to spending on public services, and devastating cuts to benefits on the basis that finances are so desperately tight, it surely cannot justify subsidising house purchases for the very wealthy. Likewise, how on earth could it have drafted legislation that allowed government money to be spent buying people second homes?
Under this legislation, the government will lend up to £120,000. If it's lending 20% of the price of the property, it means it can be used to buy houses worth £600,000. Anyone buying this sort of expensive place can afford to do it under their own steam, and if they're unable to afford it, perhaps they could lower their massive expectations and spend the average cost of a first-time buyer property (£213,000) instead - in which case their deposit will easily get them a mortgage on the open market.
Not only is this a gratuitous waste of taxpayers' money, there's the question of what it is doing to house prices. There is already plenty of debate as to whether this policy was a good idea, or whether it was simply inflating prices even further out of reach for most would-be buyers. By allowing wealthy people to cash in and buy second homes, it's helping to push up the price of property even further, so those on lower incomes will never be able to buy a place of their own.
But what do you think? Let us know in the comments.
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