Great Britain: Parliament: House of Commons: Committee of Public Accounts
Published: 2014-06-18
Total Pages: 24
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The Department for Communities & Local Government introduced the Help to Buy equity loan scheme in April 2013, with the objectives of increasing demand for new homes, making mortgage finance more accessible and affordable and encouraging developers to build more new homes. Under the Scheme, the Department makes equity loans to buyers financing up to 20% of the purchase price of newly-built properties that cost £600,000 or less, which supplements the buyers' own deposit of, normally, at least 5%. Buyers then raise a repayment mortgage of, typically, 75% of the property's value. The equity loan is interest-free for the first five years, and is paid back within 25 years, or when borrowers redeem their mortgage, for example when they sell their home. The Department initially aimed to spend up to £3.7 billion to help 74,000 households buy a new home by 2015-16. In the 2014 Budget the Government decided to extend the Scheme to March 2020, and was providing an extra £6 billion to support the purchase of a further 120,000 homes. The Scheme is administered by the Homes and Communities Agency, through its network of Help to Buy agents. The Committee has set out a number of recommendations for the Department & Agency, including: (i) Maintain downward pressure on the Scheme's costs; (ii) Follow the guidance in the HM Treasury Green Book, assessing a range of alternative options and presenting this analysis in its business case; (iii) Set out how they will protect the taxpayer and ensure they have the skills and capacity both to monitor and manage the loan portfolios; (iv) Develop a robust methodology to assess the Scheme's impact on both demand for, and supply of, new homes; (v) Assess the Scheme's effectiveness in different local and regional housing markets; (vi) Carry out a wider and integrated evaluation, assessing the combined impact of its major interventions in the housing market.