The Government is under pressure to change its £10bn Help to Buy loan scheme so that it gives more help to buyers of new homes in London and the South East.
In a report published tomorrow, spending watchdogs said ministers had not proved that the scheme provides value for money for taxpayers and should have considered other options for rushing ahead with it in April last year.
Equity loans are provided for new-build homes in England costing up to £600,000. The buyer is supposed to meet at least five per cent of the price as a deposit, the Government provides a loan for up to 20 per cent, and a mortgage covers the rest. The Government has launched a separate Help to Buy mortgage guarantee scheme which allows people to buy new and existing homes with a five per cent deposit.
Although 13,000 new homes were bought during the loan equity scheme’s first nine months, the Public Accounts Committee expressed concern that only six per cent were in London.
Margaret Hodge, the committee’s Labour chairman, said: “The scheme has proved popular in the North and Midlands, and in areas that have already seen regeneration or major housing expansion, such as Milton Keynes. So far it has had less traction in London and the South East despite the fact that these are the regions with the greatest need for new housing.”
The committee said the scheme carried medium and long term risks and was worried that some buyers had used it with deposits of less than five per cent, increasing the taxpayers’ exposure to risk.
Kris Hopkins, the Housing Minister, said: “The Help to Buy equity loan scheme is helping build more homes and support the economy – in fact we estimate the wider economic benefits of the scheme could be as much as £1.9bn. So it is offering excellent value for money for taxpayers, and to suggest otherwise is simply absurd.”
He added: “Over 27,000 people across the country have used Help to Buy to get on the property ladder with a fraction of the deposit they would normally require.”