The government’s flagship Help to Buy scheme has delivered little benefit to prospective home-owners in London. 95% of the take-up has been outside the capital. Of the 93,000 loans and mortgage guarantees completed only 5,000 have gone to Londoners. In a number of boroughs no Help to Buy loans have been taken out at all.
The Help to Buy scheme operates in two main ways. The Equity Loan scheme was introduced in April 2013. The government lends a buyer up to 20% of the price of a property if they have saved a 5% deposit, leaving them to get a mortgage for the remaining 75%. In October 2013 a second method was introduced called Mortgage Guarantee. Lenders pay the government to guarantee a mortgage, giving them the confidence to offer higher loan-to-income ratios on mortgages up to 95%
Data from the Department for Communities and Local Government shows that up to the end of March this year 47,000 equity loans had been made to the tune of £1.99 billion. Just 2,571 of those loans were in London. The number in the boroughs of Camden, Haringey, Kensington and Chelsea, Westminster and the City of London – zero.
Data for the Mortgage Guarantee scheme shows 46,800 completions, 2,517 in London. The biggest take-up was in Croydon with 240, but in the central areas of City of London, Westminster, Camden and Kensington and Chelsea there was a total of just 19.
The average price of a property supported by the Mortgage Guarantee scheme was £155,000. The average house price in London according to data from the Office for National Statistics is currently £498,000. Three quarters of mortgage guarantees go to first-time buyers. But the average first time property price in London is £387,000 according to ONS.
The high level of London property prices mean that even when a lender is offering a 95% mortgage at a multiple of 4.5 times earnings under the scheme a borrower needs a substantial income to get on the property ladder. This affordability problem, previously reported by Urbs, is reflected in the data on borrowers. The average income for borrowers using the Mortgage Guarantee scheme across England was £46,673. The average income for the small number on the scheme in London was £73,966.