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Who benefits most from Help to Buy?

More than 6,000 buyers have household income of more than £100,000

The government’s Help to Buy scheme has aided more than 150,000 property purchases – but new stats reveal that a significant portion of buyers are high-income earners.

Since it’s launch in April 2013, 158,883 equity loans have been granted through Help to Buy, with 128,317 (81%) of these going to first-time buyers.

But how many higher earners have benefited from using the scheme? Which? breaks down the statistics and looks at whether first-time buyers with small deposits might be better looking elsewhere.

  • If you’re considering buying your first home, you can get impartial, expert advice on your mortgage options by calling Which? Mortgage Advisers on 0800 197 8461.

Helping high earners to buy?

There’s no doubt that Help to Buy has aided many first-time buyers in their quest to get on to the property ladder. But is it also offering a leg-up to those who already have strong incomes?

Official data shows that from the scheme’s launch in April 2013 to the end of 2017, nearly one in ten (15,737) Help to Buy properties went to buyers with household incomes of more than £80,000.

And remarkably, 6,211 homes were bought by applicants with household incomes of more than £100,000.

Overall, the median household income of first-time buyers using the scheme was £44,068.

The median income for taxpayers aged 30-34 is £25,200, according to ONS data. If you presume that many Help to Buy properties are bought by a couple, that tracks fairly closely to the Help to Buy median income.

The table below shows the different income bands of households purchasing homes using Help to Buy.

Household income First-time buyer completions Overall completions
£0-£20,000 2,917 (2%) 3,222 (2%)
£20,001-£30,000 19,143 (15%) 21,153 (13%)
£30,001-£40,000 30,213 (24%) 34,938 (22%)
£40,001-£50,000 27,918 (22%) 34,583 (22%)
£50,001-£60,000 18,575 (14%) 24,459 (15%)
£60,001-£80,000 17,817 (14%) 24,791 (16%)
£80,001-£100,000 6,939 (5%) 9,526 (6%)
£100,000+ 4,795 (4%) 6,211 (4%)

House prices under Help to Buy

Help to Buy only applies to new-build homes, which can be considerably more expensive than older properties.

But there are some questions over whether the Help to Buy scheme also inflates the value of already pricey homes.

The Land Registry’s house price index shows the average new-build sold in March this year cost £302,522, compared with £237,206 for existing properties – and that first-time buyers paid an average of £201,635 to get on to the property ladder.

While it’s difficult to directly compare two different datasets, this is dwarfed by the £249,950 paid by first-time buyers using Help to Buy in the final quarter of 2017.

A report released last Autumn by Morgan Stanley found that the price of new-builds had outstripped second-hand homes by 15% since the launch of Help to Buy.

Help to Buy equity loans and slowing house prices

Paying a premium may seem worthwhile if it allows you to get on the property ladder faster and benefit from capital growth.

However, as we reported last month, house price stagnation could have a major effect on those with Help to Buy homes.

This is because of the equity loan. After the first five years, you start to pay interest on your loan – and in many cases, this coincides with paying a higher rate on your mortgage (if you took out a five-year fixed-rate mortgage when you bought the home).

Remortgaging can be tough in this position as many lenders require you to pay off the equity loan, a challenge that might be beyond your means if your property value fails to rise.

Should you get a 95% mortgage instead?

While Help to Buy offers you a chance to buy a home with a 5% deposit, it is possible to do this without using the scheme.

Indeed, data from Moneyfacts released earlier this week shows that 95% mortgage deals are bucking the trend of rate rises – with the average two-year fixed-rate deal dropping to 4.06% a month, and the average five-year product at 4.43%.

On top of this, the number of 95% deals available has increased significantly this year and lenders such as Atom Bank have entered the market with competitive rates.

While these costs are higher than you’ll pay with Help to Buy (as you’ll only take out a 75% mortgage), they open up the possibility of buying an existing home as well as new-builds, which may allow you to buy for less.

It’s worth also considering if you might be able to save a little more or hold off on your purchase for a while.

We recently found that buyers with a 10% deposit could save as much as 1% on their mortgage rate by getting a 90% mortgage instead of a 95% deal.

Get a callback from a mortgage adviser

If you’d like to chat through your mortgage options with a professional, you can get a free call back by filling out the form below.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.

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