Title

February 2016

Department for Communities and Local Government

Evaluation of the Help to Buy Equity Loan

Scheme

Authors: Stephen Finlay, Ipsos MORI, in partnership with

Peter Williams, Christine Whitehead and the London School

of Economics

You may re-use this information (not including logos) free of charge in any format or medium, under the

terms of the Open Government Licence. To view this licence,

http://www.nationalarchives.gov.uk/doc/open-

government-licence/version/3/ or write to the Information Policy Team, The National Archives, Kew, London

TW9 4DU, or email: psi@nationalarchives.gsi.gov.uk.

This document/publication is also available on our website at www.gov.uk/dclg

If you have any enquiries regarding this document/publication, complete the form at

http://forms.communities.gov.uk/

or write to us at:

Department for Communities and Local Government

Fry Building

2 Marsham Street

London

SW1P 4DF

Telephone: 030 3444 0000

For all our latest news and updates follow us on Twitter: https://twitter.com/CommunitiesUK

February 2016

ISBN: 978-1-4098-4761-8

Contents

Chapter 1: Executive summary 6

1.1 Introduction 6

1.2 Assessing additionality of Help to Buy Equity Loan 6

1.3 Provider and consumer perspectives of Help to Buy Equity Loan 7

Chapter 2: Introduction 10

2.1 Policy background 10

2.2 Research objectives 11

2.3 Research methods 11

2.4 Acknowledgements 12

Chapter 3: The market – a secondary data analysis 13

3.1 Introduction 13

3.2 Help to Buy within the wider market context 14

3.3 Help to Buy Equity Loan Statistics – Take-up, property profile, users, and loan

information 29

3.4 Sub National Analysis 35

3.5 Conclusion 40

Chapter 4: Supply-side perspectives 41

4.1 Developer perspectives 41

4.2 Lender perspectives 48

4.3 Help to Buy Equity Loan Agent perspective 58

4.4 Wider stakeholder perspective 63

Chapter 5: Demand-side perspectives 68

5.1 Introduction 68

5.2 Who is using Help to Buy Equity Loan? 69

5.3 Has Help to Buy Equity Loan encouraged home ownership? 72

5.4 Has Help to Buy Equity Loan impacted on ‘housing careers’? 79

5.5 Perceptions of the Help to Buy Equity Loan process 88

5.6 Conclusions 94

Chapter 6: Assessing additionality 96

6.1 Defining additionality 96

6.2 Demand-side additionality 97

6.3 Developer and lender perspectives on additionality 102

6.4 Bringing the evidence together 108

6.5 A longer term view 110

6.6 Conclusion 114

Chapter 7: Conclusions 116

7.1 The study 116

Appendix 1 122

A1 Technical details 122

A1.1 Telephone interview survey 122

A1.2 Developer and lender interviews 126

A2 Research materials 128

A2.1 Lender, Developers, Agents questions 128

A2.2 Household telephone interview survey questionnaire 133

A3 Additional tables and references 144

A3.1 References 149

Chapter 1: Executive summary

1.1 Introduction

In April 2013, Help to Buy Equity Loan was introduced with the intention of providing

a stimulus to the housebuilding market by increasing the supply of housing through

the building of more new homes. This report presents the findings from a programme

of research to consider two key objectives:

• to make a robust assessment of the ‘additionality’ of the Help to Buy Equity

Loan scheme, defined as identifying the increase in the production of housing

services (either through a greater number of new homes built or through a

production of bigger homes) as a result of the policy, over and above what

would have been produced in its absence; and

• to provide evidence of the experiences and implementation of the scheme

from the perspective of both providers and consumers.

1.2 Assessing additionality of Help to Buy Equity Loan

There are inherent challenges in making an assessment of additionality, the

introduction of the policy in April 2013 means it is not possible to establish any

meaningful counterfactual and disentangling the effects of the policy from other

related policy initiatives add further complication. Furthermore, the assessment of

additionality has to be considered in the context of the overall cycle of the scheme as

well as changes in the wider economy and housing market. Thus, a best estimate of

additionality is produced through the triangulation of various data sources.

Using primary and secondary data the research derived a central estimate that

investment in Help to Buy Equity Loan up to January 2015, is estimated to have

generated 43% additional new homes built as a result of the Help to Buy Equity

Loan policy, over and above what would have been built in the absence of the policy.

This estimate of additonality suggests that for every 100 households that purchased

with Help to Buy Equity Loan assistance, 43 lead to new dwellings being built that

would not otherwise have been built.This is equivalent to contributing 14% to total

new build output since the introduction of the policy to June 2015.

This central estimate of additionality is based on the following evidence:

• Analysis of Land Registry Price Paid Data on New Build Transactions and

Help to Buy Transaction Data from the Department for Communities and

Local Government, indicates that a third (33%) of all new build transactions,

once the policy was fully in place, have been supported by Help to Buy Equity

Loan;

• Analysis of a representative sample of consumers who have bought with the

assistance of Help to Buy Equity Loan shows that 43% would not have been

able to afford the same or similar property in the new build or existing markets

without the scheme’s assistance;

• In interviews, all developers agreed that supply was demand-led so that sales

led to starts on at least a one-to-one basis – that is if a Help to Buy Equity

Loan sale is additional, there will be an additional new build unit. Therefore

43% is the central estimate of additionality; and

• Applying the central estimate of additionality (43%) to the contribution made

by Help to Buy Equity Loan sales to new build transactions (33%) allows us to

estimate the direct impact on supply as equivalent to contributing 14% to total

new build output.

Developers, based on their own assessment of customer affordability, suggested

that up to 50% of all Help to Buy Equity Loan sales could have been added to their

sales and therefore to their new starts – this would imply that 16.5% of total new

build output was directly related to the scheme.

The analysis has provided a clear indication of the additionality triggered by the Help

to Buy Equity Loan scheme. The scheme has made consumer demand more

effective which in turn has fed through into an increase in housing supply backed by

an expanded and more supportive mortgage market. On this definition, 43% of Help

to Buy Equity Loan sales are estimated to be additional, equivalent to contributing to

14% of total new build output up to June 2015.

Allowing for wider market additonality effects, including market confidence, as well

as cash flow and capacity, suggests that the policy could have contributed as much

as 45% to total new build output initially (2013/14). This partly reflects the fact that

developers thought that sales would have declined in 2013 in the absence of this

support. Thereafter, the impacts of these wider market additonality effects are

expected to be lower - suggesting the proportion of total new build output could fall

back to a maximum of 25% from 2015.

This broader total could potentially increase as lender confidence is maintained,

mortgage availability for new build sales grows and cash flow and other financial

constraints are reduced. However the scale of the impact on output decisions into

the future depends on many other factors around the economy and financial markets

as well as the continuation of the scheme.

1.3 Provider and consumer perspectives of Help to Buy

Equity Loan

Developers are largely positive about the scheme although views and experiences

differed, particularly depending on their size. Larger developers tended to recognise

the scheme’s important role in facilitating increased building programmes and output

levels, especially when measured against projected declines pre-implementation.

Smaller developers were generally positive but the impact on their sales was more

unpredictable.

In the main, developers have seen improved confidence in the market and see Help

to Buy Equity Loan making a strong contribution to the profile and awareness of the

new build market. They estimate that between 40-50% of Help to Buy Equity Loan

sales would not have happened without the assistance. Increased sales in turn have

eased cash flow and enabled developers to buy more land (although high land prices

remain a considerable barrier to increasing output levels) and many indicate the

scheme’s positive impact on their balance sheets as it replaced previous shared

equity schemes.

Developer views of their experience of the Help to Buy Equity Loan process were

also largely positive. The simple eligibility criteria made it more appealing to potential

purchasers and this together with a strong national image had raised the profile of,

and subsequent interest in, the new build market. Many also recognised the valuable

role the scheme had played in strengthening relations between developers and

lenders.

Most developers felt Help to Buy Equity Loan would continue to play a valuable role

in helping access to the market, particularly among first-time buyers, with most

having little concern were the maximum price limit to be reduced.

Among lenders, although the new build lending market is dominated by a small

number of large providers, the introduction of Help to Buy Equity Loan had helped

make it more financially viable to enter the new build lending market. In turn this is

seen to have built capacity and encouraged lenders back to higher loan to value

lending, a trend consistent with wider evidence showing uplifts in the number and

value of new mortgage loans (although still remain below pre-crisis levels) and

higher loan to value mortgage products since early 2013. Lenders were however

less clear on the extent to which it had resulted in increased levels of output although

most recognised that if the scheme had not existed, the new build market would

have evolved more slowly.

Experience of the process for lenders was again largely positive with perceived

concerns principally focussed on consumer understanding of the scheme,

particularly around mortgage portability and paying off the equity loan element,

although there appears to be little evidence of this from the consumers interviewed

(see below).

Among Help to Buy agents, the less restrictive criteria associated with Help to Buy

Equity Loan, compared to previous schemes, was seen to be more attractive to

developers, creating greater momentum and enabling the scheme to assist more

buyers. It was felt that the process was handled as efficiently as possible, in large

part reflecting that agents were only paid on completion. Agents also recognised how

the scheme had strengthened their relationship with developers.

The survey of consumers, based on those who have successfully purchased using

Help to Buy Equity Loan, presents a largely positive picture in terms of experiences

and impacts. A lack of consumer understanding of finances is not apparent. A

majority (58%) of those surveyed say they had a great deal of understanding about

the financial commitment when they bought while an overwhelming majority continue

to remain confident in their ability to pay mortgage repayment and the equity loan

elements. Stated levels of satisfaction with the overall experience are also high, with

70% saying they were very satisfied.

The survey showed that the scheme has helped improve access to the homeowner

market, and assisted moves within that market. Key findings include:

• Median income levels of first-time buyers using the scheme (who make up the

majority of the sample) are in line with national estimates

, while median

deposits are below national estimates

and a majority (64%) say they did not

use additional sources of finance to help with their deposit;

• A majority (82%) say they would not have been able to buy the same property

without assistance, while most agreed the scheme had helped them buy

property that was bigger (61%) or in a better area (60%);

• A majority (61%) say they started to look for property to buy sooner than they

otherwise would have; and

• A significant minority (36%) say they feel unable to move up the property

ladder now, a sentiment that is strongest among those at the lower end of the

market (in flats and smaller sized property).

Overall, the scheme has met its objectives in terms of increased housing supply. It

has done this via a stimulus to demand which has fed through into an expansion of

supply and with little evidence of a serious and destabilising impact on house prices

– Help to Buy Equity Loan has typically supported 2% to 3% of total residential

property transactions in England on a monthly basis. The scheme helped restore

market confidence as shown by consumers, developers and lenders and as

expressed in re-invigorated regional and local housing markets.

See https://www.cml.org.uk/industry-data/ Note this will also include those who have purchased using Help to

Buy Equity Loan

See

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/445547/Chapter_3_Owner_occupi

ers.pdf

Chapter 2: Introduction

2.1 Policy background

With the slow recovery of both housebuilding and the mortgage market the Help to

Buy Equity Loan scheme was announced in the March 2013 Budget as part of a

broader range of measures which aimed to increase the supply of low-deposit

mortgages for credit-worthy households. These measures also included the Help to

Buy: mortgage guarantee scheme. The policy initiatives aimed to offset some of the

negative impact of the dearth of higher loan to value (above 70/75%) lending which

had significantly decreased since the downturn, and had particularly impacted on

first-time buyers.

As well as addressing deposit and affordability issues the Help to Buy Equity Loan

scheme also intended to provide a stimulus to the housebuilding industry and the

housing market by encouraging developers to build more new homes.

The Help to Buy Equity Loan scheme is funded to a value of £9.7 billion until 2020

and is expected to cover up to 194,000 new home buyers. The specific scheme only

applies in England and is administered by the Homes and Communities Agency who

work with local Help to Buy Agents. By the end of June 2015 more than 55,000

properties had been bought with the help of this scheme

The Help to Buy Equity Loan scheme was introduced on April 1

2013 and was open

to all those who wanted to buy a new build home. The scheme grants an equity loan

worth up to 20 per cent of the value of the new build home. The buyer has to provide

a cash deposit of at least five per cent and a main mortgage lender a loan of up to 75

per cent. There are only a few restrictions around eligibility for the scheme - it applies

only to property worth up to a value of £600k and the property must be the primary

residence.

The equity loan is fully repayable when the owner sells their home or at the end of

their mortgage, whichever comes first. The equity loan has a planned term of 25

years and is always longer than the main mortgage. A minimum of 10% of the total

property value can be part repaid at any time after the first year of the loan. If the

property has increased in value since purchase then the owner will pay back a

greater sum than borrowed to cover the equity loan; conversely if the property

decreases in value the owner will pay back a lesser amount. This means that the

government shares in any capital gain or loss.

Supplied by Department for Communities and Local Government (via the Home and Communities Agency who

have responsibility for administering the scheme)

If, after five years, the equity loan has not been repaid an annual charge of 1.75% of

the market value of the property is applied. This fee increases annually by retail price

index plus one per cent, if this is positive. The aim of this charge is to encourage

borrowers to pay off the equity loan.

2.2 Research objectives

In March 2015, Ipsos MORI, in partnership with Peter Williams, Christine Whitehead

and the London School of Economics, were commissioned by the Department of

Communities and Local Government to undertake an evaluation of the Help to Buy

Equity Loan Scheme.

The primary objective of this study is to provide a comprehensive evidence base to

make a robust assessment of the ‘additionality’ of the Help to Buy Equity Loan

scheme – defined as identifying the increase in the production of housing services

(either through a greater number of new homes built or through a production of

bigger homes) as a result of the policy, over and above what would have been built

in the absence of the policy.

The second objective is to provide evidence on the perceived experiences,

implementation and reach of the scheme, from the point of view of consumers and

those organisations involved in the delivery of the policy (termed providers in this

report).

2.3 Research methods

In seeking to address the core objectives we have been mindful of the challenges

posed by separating out effects, given the number of relevant interventions in both

the housing and finance markets during this period as well as the difficulty of

understanding what might have happened without the scheme due to the lack of an

appropriate counterfactual.

With these issues in mind the research team developed a programme of research

using a range of primary and secondary research methods in order to triangulate

results and meet the research objectives. These include:

• Analysis of existing secondary data sources – drawing on a range of

secondary data sets (including general housing market statistics, mortgage

market statistics, housebuilding data and a number of other private sources)

to seek to identify any changes in new build housing market conditions pre-

and post-implementation;

• Qualitative in-depth interviews – covering developers, lenders, agents and

wider stakeholder groups (such as Homes and Communities Agency, Council

of Mortgage Lenders, Home Builders Federation) a total of 43 interviews have

been conducted to capture evidence of actual change in terms of numbers of

homes, relevant mortgage products and additional movement in the housing

market as well as any shifts in sentiment in the industries; and

• Quantitative telephone survey – conducted by Ipsos MORI with a

representative sample of 501 households who had purchased a property with

the assistance of Help to Buy Equity Loan

. The survey was designed to

capture ‘demand-side’ perspectives, in particular to assess the numbers who

in the absence of the policy would not have been able to purchase. The

survey also captures evidence on the experience of the Help to Buy Equity

Loan process from the ‘consumer’ perspective.

Further technical details on these elements of the research programme are provided

in Appendix 1 and 2 to this report and include details of all research materials used

for the primary data collection elements.

2.4 Acknowledgements

We would like to thank all the organisations and individuals who participated in the

in-depth interviews and the survey, without whose valuable input the research would

not have been possible. We would also like to thank Suzanne Cooper, Diana

Kasparova and Stephanie Kvam at the Department, as well as other members of the

Project Board and Steering Group and particularly Professor Michael Ball, University

of Reading, for his external academic peer reviewer contributions.

Drawn from a sample frame supplied by the Department (via the Home and Communities Agency who have

responsibility for administering the scheme) at January 2015 comprising 44,471 records. Results are

representative in terms of first-time buyer status, broad region, property size and time since completion.

Chapter 3: The market – a secondary data

analysis

3.1 Introduction

A number of secondary datasets have been explored in relation to this project, both

within official and industry statistics. There are a limited number of relevant datasets

which can be expected to provide significant value added because the scheme has

only been running for just over two years - so most actual Help to Buy Equity Loan

activity must inherently come out of the pipeline already in place prior to its

introduction.

Furthermore while it is possible to describe what is happening, it is not possible to

identify causation. To the extent that the data can be interpreted it is likely mainly to

indicate what might be happening in the market now and in the future – e.g. through

increased sales activity and growing confidence as activity rates rise – rather than

provide any direct measure of additional output simply because of the short period of

elapsed time since its introduction. In this context it is important to note, as

discussed further in Chapter 4, that Help to Buy Equity Loan is seen as a very

different product from immediately preceding products.

Additionally, there have been a number of difficulties in securing relevant data

including whether Help to Buy Equity Loan activity was identified in each relevant

dataset as well as a reluctance on the part of a number of private sector providers to

make data available – partly because of the costs and time involved in extracting the

relevant datasets.

The secondary data sets explored include Help to Buy Equity Loan statistics, more

general housing market statistics, mortgage market statistics, housebuilding data

including the Home Builders Federation New Housing Pipeline Data report produced

in conjunction with Glenigan, the National House Building Council annual New Home

Statistics Review 2014 plus a number of other private sources. The latest available

aggregated data on Help to Buy Equity Loan purchases are also presented, based

on unpublished management information held by the Homes and Communities

Agency covering transactions up to 30 June 2015, of which headline official statistics

are published by the Department

The project specification set out the expectation that analysis of such datasets would

help establish changes in new build housing market conditions - pre- and post-

implementation and through the duration of the scheme which we can then

https://www.gov.uk/government/collections/help-to-buy-equity-loan-and-newbuy-statistics

triangulate with the analysis with the primary data. We note above that any such

analysis can at best be indicative.

In the analysis that follows we begin by analysing wider general housing market

trends and identifying trends before and after the introduction of Help to Buy Equity

Loan. We then present more detailed equity loan statistics in order to establish the

main attributes of Help to Buy Equity Loan sales and then move on to look at data at

local authority level.

3.2 Help to Buy within the wider market context

An understanding of the role of Help to Buy Equity Loan must start from the post-

global financial crisis recession and the up-turn of private house building from its low

points in 2008/9 to 2010/11 (depending upon whether measured by starts or

completions). Help to Buy Equity Loan was introduced in April 2013 as a

replacement for both government and industry sponsored shared equity products. By

that time there was already evidence of expansion in housing starts - although the

improvement was fairly hesitant and from a very low base (65,000 in 2009).

In this section we begin by looking at planning permissions, before moving on to

starts, completions and transactions data. We then consider house prices, the

mortgage market and consumer confidence. Our focus throughout is on the possible

impact of Help to Buy Equity Loan.

Planning Permissions in England and in the North, Midlands and South

Figure 3.1 shows changes in the number of private housing units securing detailed

planning approval between January 2011 and February 2015. The red shaded

portion indicates when Help to Buy has been in place. There is an upward trajectory.

Figure 3.1: Number of residential units securing detailed planning approval,

England, January 2011-February 2015

Source: Glenigan, 2015

Planning permissions in the North, Midlands and South (excluding London) have

seen some growth in the number of private housing units being approved since mid-

2012 (Figure 3.2). Planning approvals increased by 58% in the Midlands in 2013, the

year Help to Buy Equity Loan was introduced, compared to a year earlier (Glenigan

and HBF, 2015). Over the same period, permissions increased by about 20% in the

North and South. In London, planning permissions increased considerably between

2012 and mid-2014, but then fell sharply in 2014 Quarter 3 (Figure 3.3).

Figure 3.2: Residential units securing detailed planning approval, North,

Midlands and South (excluding London), 2009-2014

Source: Glenigan and Home Builders Federation, 2015

Figure 3.3: Residential units securing detailed planning approval, London,

2009-2014

Source: Glenigan and Home Builders Federation, 2015

Starts and Completions

There is no means of comparing Help to Buy Equity Loan starts with the wider

market as these are not identified until sale. We can, however, look at trends in the

numbers of starts over time identifying any changes since Quarter 2 2013 when Help

to Buy Equity Loan was introduced.

Private developers in England started 99,000 homes in 2013 and 112,000 in 2014.

These were strong improvements from the low of 65,000 starts in 2009, but starts

have still not yet returned to pre-crisis levels - there were 159,900 private starts in

2007 (Table 3.1). Completions have followed a somewhat similar pattern (Figure

3.4).

Growth in starts is less well established in London, although the first two quarters of

2015 show strong improvement. In market terms this might seem surprising given

that the greatest economic improvement has been centred on London and the South

East.

Table 3.1: Private Enterprise Starts and Completions, 2007-2014

2007

2008 2009 2010 2011 2012 2013 2014

2015

(Q1 &

Q2)

London

starts

16,060

10,660

8,830

10,170

14,200

11,220

13,040

12,850

10,430

London

completions

15,230

13,190

14,340

8,870

10,580

12,310

11,460

12,020

6,680

Rest of

England

starts

143,840

71,710

56,170

74,690

73,590

69,040

85,780

97,060

52,560

Rest of

England

completions

138,990

107,910

83,280

74,410

75,310

76,440

75,550

80,730

46,320

England

starts

159,900

82,370

65,000

84,860

87,790

80,260

98,820

109,910

62,990

England

completions

154,220

121,100

97,620

83,280

85,890

88,750

87,010

92,750

53,000

Source: Department for Communities and Local Government 2015a, Live Table 253a (released 20 August

2015 and updated from 19 November 2015 release)

Figure 3.4: Private enterprise starts and completions, England, by quarter, Q1

2007- Q2 2015

Source: Department for Communities and Local Government 2015a, Live Table 253a (released 20

August 2015 and updated from 19 November 2015 release)

Note: Quarterly seasonally unadjusted figures used for direct comparison

As will be discussed later in section 3.3, Help to Buy Equity Loan transactions have

been concentrated in lower priced Homes and Communities Agency Operating

Areas, with only 24% of transactions occurring in the South East, East and London

(See Table 3.17). The stronger growth of starts outside London also suggests that

Help to Buy Equity Loan works better in lower priced areas but that in those areas it

has also helped stabilise and improve the market in a way that has not occurred in

the capital. Table 3.2 below gives England figures for quarterly private enterprise

starts, completions and Help to Buy Equity Loan transactions where applicable.

Table 3.2: Private enterprise starts and completions and Help to Buy Equity

Loan transactions, England, 2007-2015

Year & Quarter

Private

Enterprise starts

Private

Enterprise

completions

Help to Buy

Equity Loan

transactions

43,040

38,450

41,470

38,940

40,440

34,620

2007

34,950

42,210

29,290

31,410

25,400

32,750

15,670

27,230

2008

12,010

29,720

12,490

24,100

15,360

25,590

20,160

22,210

2009

16,990

25,720

21,260

19,520

24,930

22,400

20,210

2010

16,270

21,150

21,120

19,430

23,390

23,120

23,660

19,650

2011

19,620

23,690

20,630

22,670

19,820

23,160

22,230

19,670

2012

17,580

23,250

22,350

18,480

26,420

23,780

2,103

28,370

20,610

3,945

2013

21,680

24,140

7,976

30,370

21,110

5,582

29,610

24,670

8,777

29,150

21,640

5,847

2014

20,780

25,330

8,181

32,760

24,470

4,924

2015

30,230

28,530

9,067

Sources: Starts and Completions data, Department for Communities and Local Government,

2015e, Live Table 213; Help to Buy data, Department for Communities and Local Government

2015c, data published 09 September 2015 (updated from 19 November 2015 release)

Similarly, Figure 3.5 shows National House-Building Council private sector new build

registrations by quarter, with the red shaded area representing when Help to Buy

Equity Loan is in operation. There is some evidence of strengthening.

Figure 3.5: Private sector new build registrations, 2006-2014

Source: National House-Building Council, 2015

Help to Buy Equity Loan and market transactions

Help to Buy Equity Loan activity can best be compared with wider market

transactions. There have been 56,402 Help to Buy Equity Loan transactions in the

two years between April 2013 and June 2015 and Help to Buy Equity Loan has

typically supported 2 to 3% of total residential property transactions in England on a

monthly basis. The peak month was June 2014, when Help to Buy Equity Loan

accounted for 6% of total housing transactions (Table 3.3). Around a third of all new

build transactions once the policy was fully in place have been supported by Help to

Buy Equity Loan.

Table 3.3: Help to Buy Equity Loan transactions and total transactions over

time, April 2013 – June 2015

Month

Help to Buy

Equity Loan

transactions

in England

Transactions

in England

Help to Buy

Equity Loan

as percent of

total

transactions

New Build

Transactions

Help to Buy

Equity Loan

as percent

of New Build

transactions

2013

Apr

48,769

4,835

May

318

63,349

6,028

Jun

1,777

63,011

10,314

17%

Jul

775

70,450

4,818

16%

Aug

1,376

75,995

6,190

22%

Sep

1,794

66,568

6,709

27%

Oct

1,744

73,179

6,348

27%

Nov

2,346

78,935

7,310

32%

Dec

3,886

75,864

10,557

37%

2014

Jan

1,175

62,435

4,318

27%

Feb

1,628

62,207

5,239

31%

Mar

2,779

64,284

7,196

39%

Apr

1,870

67,024

6,166

30%

May

2,369

73,799

7,112

33%

Jun

4,538

77,112

11,791

38%

Jul

1,651

80,680

6,100

27%

Aug

1,958

83,876

6,492

30%

Sep

2,238

75,266

7,101

32%

Oct

2,211

82,259

7,156

31%

Nov

2,226

69,580

6,647

33%

Dec

3,744

74,015

10,407

36%

2015

Jan

1,111

53,914

4,029

28%

Feb

1,328

54,853

4,727

28%

Mar

2,485

61,134

7,291

34%

Apr

1,773

57,232

5,614

32%

May

2,549

64,250

5,593

46%

June

4,745

67,028

5,845

81%*

Sources: Transactions in England, Land Registry, 2015; New Build Transaction Data, Land Registry Price

Paid Data, various years (accessed 17 October 2015); Help to Buy Transaction Data, Department for

Communities and Local Government, 2015c, data published 09 September 2015

* Figure likely to be amended in future revisions to published data

Figure 3.6 compares the trend in new build transactions and the trend in Help to Buy

Equity Loan transactions. It clearly shows the seasonality of both, with spikes

occurring around June and December (relating to developer reporting requirements),

and it shows that after October 2013, Help to Buy Equity Loan transactions usually

made up just under a third of all new build transactions in England. Figure 3.7 shows

the trend in all property transactions in England over the period since the scheme

was introduced (red line and left axis) compared to the trend in Help to Buy Equity

Loan transactions over time (blue line and right axis).

Figure 3.6: Help to Buy Equity Loan and new build residential property

transactions in England, April 2013-June 2015

Source: New Build Transactions, Land Registry Price Paid Data, various years (accessed 17 October

2015); Help to Buy Transactions, Department for Communities and Local Government, 2015c, data

published 09 September 2015

Figure 3.7: Help to Buy Equity Loan and total residential property transactions

in England, April 2013-June 2015

Source: Total Transactions, Land Registry, 2015; Help to Buy Transactions, Department for

Communities and Local Government, 2015c, data published 09 September 2015

House prices

Average property prices in England have been steadily rising since January 2010.

Figure 3.8 juxtaposes average price trends for all property in England against the

average property price of Help to Buy Equity Loan purchases. This shows both the

difference in price and the similarity in market trajectory.

Figure 3.8: Average property price in England and average Help to Buy Equity

Loan property price, 2010-2015

Source: Average property price data, Office for National Statistics, 2015a, HPI Reference Table 2

(data published 13 October 2015); Help to Buy Equity Loan Average Property Price Data, Homes and

Communities Agency, 2015

The price of new build property has been a source of some debate over a number of

years although this has subsided since the downturn. However it has resurfaced

around Help to Buy Equity Loan with some but not all lenders raising the issue. It is a

difficult area to research given it is about comparing the price of new build with

existing homes and thus there is a question of equivalence. However, based on

market data collected by Esurv (2015) (not reproduced here) the evidence suggests

that new flats, semi-detached and terraced properties are more likely to command

what are in effect a quite varied price premium than new detached properties across

the country. New build price premia are particularly significant in the North of

England and in the Midlands.

Table 3.4 shows average prices of new build properties in London and England

compared with average Help to Buy Equity Loan prices in 2013, 2014 and 2015.

Table 3.4: Average price of New Build Property and Help to Buy Equity Loan

property, London and England, 2010-2015 Q1 (£)

Year

Quarter

England,

simple

average new

dwelling

house price

(£)

England,

Help to Buy

Equity

Loan

average

purchase

price (£)

London,

simple

average new

dwelling

house price

(£)

London,

Help to Buy

Equity

Loan

average

purchase

price (£)

2010

211,000

234,000

218,000

264,000

218,000

272,000

222,000

253,000

2011

214,000

257,000

225,000

295,000

235,000

301,000

241,000

349,000

2012

232,000

327,000

235,000

335,000

237,000

313,000

237,000

328,000

2013

234,000

357,000

250,000

186,093

384,000

263,561

250,000

198,870

341,000

273,594

250,000

208,714

365,000

296,766

2014

274,000

211,789

423,000

286,078

294,000

218,070

511,000

331,472

294,000

217,270

441,000

313,334

280,000

219,671

467,000

342,484

2015

274,000

220,086

477,000

325,671

294,000

231,224

527,000

351,126

Source: Simple average new dwelling prices, Office for National Statistics, 2015b House Price

Index Reference Table 11; Help to Buy average prices, Homes and Communities Agency, 2015,

unpublished management data

There has also been extensive and divergent media discussion around the issue of

whether Help to Buy Equity Loan has boosted house prices

. As we argue it almost

certainly helped to stabilise prices. However the evidence that it led to a house price

boom is weak as a simple comparison between the number of Help to Buy Equity

Loans and total transactions (see Table 3.3 above) and the total number of mortgage

loans would indicate.

For example, see http://www.bbc.co.uk/news/uk-24061897

Further, as evidenced later in this chapter, the ten local authority areas with the

highest Help to Buy Equity Loan activity saw median house prices between 2013

and 2014 increase by 6.5% on average. This compares to an increase of 10.5% in

median house prices between 2013 and 2014 across England as a whole

A recent report from Shelter (2015) as well as other commentary (eg, Savills, 2014a

and b) have also noted that the impacts of the scheme vary by region and locality but

that it was clear Help to Buy Equity Loan was not driving the market in ways some of

the more negative commentaries had suggested. The Financial Policy Committee

recently reached the same conclusion with respect to the Help to Buy mortgage

guarantee scheme (Financial Policy Committee, 2015).

The mortgage market

Turning to the mortgage market, Figure 3.9 shows the number of new loans for

house purchase in England since 2007. It clearly reflects the effects of the global

financial crisis, with loan volumes dropping dramatically after mid-2007. Since the

low point in early 2009 loan volumes have been on an upward trend, although they

are still almost a third below the pre-crisis peak. Figure 3.10, which presents data on

the value of new mortgage loans, tells a similar story. Both indicate that there was an

uplift in early 2013.

Figure 3.9: Number of new loans for house purchase, England, 2007-2015

Source: Council for Mortgage Lenders Economics, 2015

Office for National Statistics, 2015a, HPI Reference Table 2 (data published 13 October 2015)

Figure 3.10: Value of new loans for house purchase (£m), England, 2007-2015

Source: Council for Mortgage Lenders Economics, 2015

High loan to value loans became much less available after the crisis, but in the last

few years lenders have increased the number of such products on offer. Figure 3.11

shows that since 2012, the number of loan products with maximum loan to values of

90% has more than doubled, and the numbers of maximum 80% and 85% loan

products have also increased.

In this context while it is important to recognise that the vast majority of Help to Buy

Equity Loan transactions involve traditional mortgages of around 75%, the

programme was also about restoring confidence in the market (commented on

further in Chapter 4.2). The recovery of the higher loan to value product market is

part of that story. Further it should be noted that not all offers were available for new

build properties and this was particularly the case at higher loan to values.

Figure 3.11: Number of new mortgage products by loan to value band by

month 2012-2015

Source: Moneyfacts

Consumer confidence

Data on market confidence (Halifax housing market confidence as measured by

Ipsos MORI) show some general improvement between 2011 and 2015, with more

people believing that it is a fairly good time to buy or sell property (Tables 3.5 and

3.6; Figures 3.12 and 3.13). Since 2013, however, the proportion of people thinking it

is a ‘very good time to buy’ has decreased by over 3% with a corresponding increase

in those reporting it is either a ‘fairly bad time’ or that they are unsure.

Table 3.5: Results, survey question: ‘Thinking about the next 12 months, do

you think it would be a good time or a bad time for people in general to buy a

property?’ (per cent)

2011

2012 2013 2014 2015

Very good time to buy

11.3%

13.2%

9.7%

6.7%

6.4%

Fairly good time to buy

40.3%

40.4%

48.4%

46.6%

49.2%

Fairly bad time to buy

23.7%

21.9%

23.0%

27.1%

25.0%

Very bad time to buy

10.7%

10.0%

7.0%

6.6%

4.6%

Don't know

14.0%

14.6%

11.7%

12.7%

15.0%

Source: Ipsos MORI, Various years; author’s calculation

Figure 3.12: Results, survey question: ‘Thinking about the next 12 months, do

you think it would be a good time or a bad time for people in general to buy a

property?

Source: Ipsos MORI, Various years; author’s calculations

Table 3.6: Results, survey question: ‘Thinking about the next 12 months, do

you think it would be a good time or a bad time for people in general to sell a

property?’ (per cent)

2011

2012

2013

2014

2015

Very good time to sell

1.0%

1.6%

3.8%

8.9%

6.6%

Fairly good time to sell

10.7%

14.4%

32.4%

45.9%

49.8%

Fairly bad time to sell

43.3%

45.4%

38.3%

27.3%

24.0%

Very bad time to sell

29.0%

23.1%

12.5%

5.5%

3.6%

Don't know

15.0%

15.2%

12.4%

12.7%

16.0%

Source: Ipsos MORI, Various years; author’s calculations

Figure 3.13: Results, survey question: ‘Thinking about the next 12 months, do

you think it would be a good time or a bad time for people in general to sell a

property?

Source: Ipsos MORI, Various years; author’s calculations

Conclusions on market context data

These market context data show that Help to Buy Equity Loan was introduced when

some signs of an improvement in housing market activity as measured by these

different statistics were already in place. Since then that improvement has generally

strengthened - although there are notable differences between Homes and

Community Agency Operating Areas where Help to Buy Equity Loan covers a larger

proportion of new build sales as opposed to in the South where Help to Buy Equity

Loan provides less support to making new homes affordable.

It is not possible to say what might have happened without the new policy, although

the secondary data on starts suggest that the initial improvement in the

housebuilding market prior to the scheme was not robust. Equally we cannot say

how much of the upturn and its strength can be explained by the policy. The

interviews and other primary data discussed in the next two chapters would generally

support the view that it has had a positive effect and we develop this assessment

into an overall view of additionality in Chapter 6.

3.3 Help to Buy Equity Loan Statistics – Take-up,

property profile, users, and loan information

Analysis of Help to Buy Equity Loan purchaser data indicates that as of end-June

2015, the Help to Buy Equity Loan programme had been responsible for over £2bn

of equity loans, supporting the purchase of over £12bn worth of property (Table 3.7).

Table 3.7: Help to Buy Equity Loan figures (as of 30 June 2015)

Transactions

Value of Equity

Loans (£m) at

completion

Total value of

properties sold

(£m)

Cumulative value after two

years (March 2013-June

2015)

56,402

£2,424.81 £12,184.53

Source: Department for Communities and Local Government, 2015c

The dwellings purchased using Help to Buy Equity Loan have generally been family-

sized properties. Nearly half of all properties purchased under the programme have

three bedrooms (Table 3.8). Smaller properties - those with one and two bedrooms -

account for about a quarter of homes purchased so far under the programme. The

proportion of smaller homes bought with Help to Buy Equity Loan has fallen over the

seven quarters for which data are available, from 33% in the second quarter of 2013

to 24% in the first quarter of 2015.

Table 3.8: Property size by number of bedrooms (as of 30 June 2015)

Number

of bed-

rooms

Q2 2013 (%)

Q3 2013 (%)

Q4 2013 (%)

Q1 2014 (%)

Q2 2014 (%)

Q3 2014 (%)

Q4 2014 (%)

Q1 2015 (%)

Q2 2015 (%)

% of all

trans-

actions

(as of

June

2015)

% of all

trans-

actions

London

(as of 30

June

2015)

24%

27%

26%

25%

24%

23%

21%

19%

21%

23%

47%

45%

46%

44%

45%

46%

49%

47%

22%

20%

22%

25%

27%

25%

Source: Source: Homes and Communities Agency, 2015 unpublished management data

This picture generally reflects the geographical pattern of transactions (Table 3.9).

The distribution in London is quite different to the national picture, with over 70% of

Help to Buy Equity Loan properties having only one or two bedrooms. There are a

variety of factors that may account for this observed difference, including a generally

younger age profile across London and a greater proportion of property that are

flats

Table 3.9: Property size distribution by Homes and Communities Agency

Operating Area (as of 30 June 2015)

HCA Operating Area

1-bed

2-beds

3-beds

4-beds

5+beds

London

24%

47%

22%

East and South East

28%

42%

23%

South and South West

26%

44%

24%

Midlands

19%

47%

29%

North West

15%

55%

27%

North East, Yorkshire

and the Humber

17%

56%

24%

Source: Homes and Communities Agency, 2015 unpublished management data

Help to Buy Equity Loan has mainly supported the purchase of houses (Table 3.10).

As of June 2015, some 16% of all Help to Buy Equity Loan transactions were for flats

and 84% for houses, split fairly equally among detached, semi-detached and

terraced houses.

Table 3.10: Property type (as of June 2015)

Type of property

Percentage of all transactions (as of

30 June 2015)

Flats

16%

Houses

Detached

27%

Semi-Detached

29%

Terraced

28%

Source: Department for Communities and Local Government, 2015c

Almost half (49%) of the stock in the London area are flats compared with 16% of homes outside of London –

see English Housing Survey Profile of English Housing 2013.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/445370/EHS_Profile_of_English_h

ousing_2013.pdf

Most Help to Buy Equity Loan users have been first-time buyers. In England as a

whole some 82% of recipients were first-time buyers, while in London the proportion

was higher, at 95% (Table 3.11).

Table 3.11: Proportion and number of Help to Buy Equity Loan recipients who

are first-time buyers (as of 30 June 2015)

Location

First-

time

buyer

Not first-time

buyer

Total number

transactions

London

95%

3,128

Rest of the Country

82%

18%

53,274

England

82%

18%

56,402

Source: Homes and Communities Agency, 2015, unpublished management data

Data on household income show that about half of Help to Buy Equity Loan

borrowers had household incomes below £40,000. Some 64% of borrowers had

household incomes between £20,000 and £50,000 (Figure 3.14). A small proportion

had either lower household incomes (below £20,000) or higher ones (over £100,000)

- about 3% in each case.

Figure 3.14: Help to Buy Equity Loan transactions by household income band

as of 30 June 2015

Source: Department for Communities and Local Government, 2015c

For the programme to date, the mean applicant household income in the country as

a whole was £47,200 (Table 3.12). Incomes were highest in London (average

£64,900) and lowest in the Homes and Community Agency Operating Areas of the

North East, Yorkshire and the Humber (average £39,000).

Table 3.12: Average Help to Buy Equity Loan applicant household income by

Homes and Communities Agency Operating Area (as of 30 June 2015)

HCA Operating Area

Mean household income

London

£64,901

East and South East

£54,448

South and South West

£49,454

Midlands

£44,825

North West

£41,412

North East, Yorkshire and the Humber

£39,006

Overall

£47,189

Source: Homes and Communities Agency, 2015, unpublished management data

The average price of a property purchased under the Help to Buy Equity Loan

programme to date has been £216,000. The regional distribution of property prices

reflected that of incomes: the highest prices were in London (average over

£300,000) while the lowest were in the Homes and Community Agency Operating

Areas of the North East, Yorkshire and the Humber (average £165,000) (Table 3.13).

Table 3.13: Average purchase prices, deposits, mortgages and loan values of

Help to Buy Equity Loan transactions by Homes and Communities Agency

Operating Area (as of 30 June 2015)

HCA Operating Area

Average

Purchase

Price

Average

Mortgage

Average

Equity

Loan

Average

Deposit

London

£314,210

£223,897

£62,270

£28,043

East and South East

£258,182

£184,043

£51,383

£22,756

South and South West

£238,709

£169,417

£47,532

£21,760

Midlands

£200,741

£144,427

£39,938

£16,375

North West

£177,722

£128,252

£35,418

£14,052

North East, Yorkshire

and The Humber

£164,939

£119,517

£32,852

£12,570

OVERALL

£216,030

£154,726

£42,992

£18,312

Source: Homes and Communities Agency, 2015, unpublished management data

About three-quarters of properties bought under the programme cost between

£100,000 and £250,000, with only a small percentage costing less than £100,000 or

more than £450,000 (Table 3.14). In the first two years of Help to Buy Equity Loan

the proportion of higher-value properties increased probably reflecting observed

behaviour across the market commented on earlier in this chapter. In 2013 some

11% of purchased properties cost more than £300,000, but by 2014 this percentage

had grown to 16%.

Table 3.14: Price distribution (as of 30 June 2015)

Percent of transactions by year

Total to 30 June

2015

Price Band

2013

2014

2015 (to

30 June

2015)

Number %

£50,000-£99,999

1,514

£100,000-£149,999

24%

20%

17%

11,436

20%

£150,000-£199,999

32%

30%

29%

17,149

30%

£200,000-£249,999

21%

20%

11,685

21%

£250,000-£299,999

12%

14%

6,651

12%

£300,000-£349,999

3,243

£350,000-£399,999

2,049

£400,000-£449,999

1,123

£450,000-£499,999

868

£500,000-£549,999

306

£550,000-£600,000

378

Total transactions

14,024

28,387

13,991

56,402

Source: Homes and Communities Agency, 2015, unpublished management data

In more than two years of operation, a total of 838 developers have made Help to

Buy Equity Loan transactions. Of those, the top ten accounted for 70% of

transactions (Table 3.15). The most active developers each accounted for around

15% of transactions.

Table 3.15: Top ten Help to Buy Equity Loan developers, percent of

transactions over time and Homes and Communities Agency Operating Area

(HCA OA) where most active (as of 30 June 2015)

2013

2014

2015

%of all

trans-

actions

to 30

Jan 15

HCA

where

most

active

Developer

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

27%

14%

15%

12%

21%

10%

16%

13%

20%

16%

Mids

18%

10%

18%

11%

21%

11%

19%

16%

Mids

12%

13%

12%

14%

13%

14%

13%

Mids

10%

Mids

S & SW

NE,Y&H

S & SW

E & SE

Source: Homes and Communities Agency, 2015, unpublished management data

Table A3.1 in the Appendix 3 shows the house builders with more than 20 active

sites as of May 2015. All of the top ten Help to Buy Equity Loan developers except

for Galliford are on this list.

Some 18 lenders have made loans under the programme, but most were

responsible for only a small number of transactions. The top four lenders who are

also among the top mortgage lenders in the general market together accounted for

over 80% of Help to Buy transactions since the start of the programme (Table 3.16).

A major lender’s share of loans has fallen since the onset of the programme and in

2015 Quarter 2 was just 23% (down from 85% in the first quarter of Help to Buy).

Two other major lenders have grown their Help to Buy Equity Loan business strongly

in the last three quarters.

Table 3.16: Top 7 Help to Buy lenders, percentage of transactions by quarter

(as of 30 June 2015)

2013

2014

2015

% of all

trans-

actions

to 30

June

2015

Number

loans

to 30

June

2015

Lender

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

85%

60%

48%

40%

41%

36%

28%

19%

23%

38%

21,279

24%

36%

40%

36%

30%

26%

39%

44%

34%

19,121

12%

11%

10%

11%

12%

10%

11%

6,087

11%

15%

16%

10%

4,600

2,281

1,291

1,032

Source: Homes and Communities Agency, 2015, unpublished management data

3.4 Sub National Analysis

The ‘East and South East’ Homes and Communities Agency Operating Area

accounts for the largest number of transactions under the programme, with more

than three times as many as London, the region with the fewest (Table 3.17). In the

Operating Areas of the Midlands and the North of England, where 56% of all Help to

Buy Equity Loan transactions occurred, transactions completed with a Help to Buy

Equity Loan represented between 3-4% of all transactions in those areas. This is in

contrast to London and the East and South East, where Help to Buy Equity Loan

only accounted for 1-2% of all transactions. The Operating Area where Help to Buy

Equity Loan transactions represented the largest proportion of total transactions was

the South and South West.

Table 3.17: Help to Buy Equity Loan transactions by Homes and Communities

Agency Operating Area (as of 30 June 2015)

HCA Operating Area

Number of

Transactions

Proportion of

all Help to Buy

Equity Loan

Transactions

Proportion of

all

Transactions

in Area*

London

3,128

East and South East

10,398

18%

South and South West

11,168

20%

Midlands

14,817

26%

North West

7,106

13%

North East, Yorkshire and the

Humber

9,785

17%

Overall

56,402

100%

Source: Homes and Communities Agency, 2015, unpublished management data, Total Transaction

Data, Land Registry 2015

*Land Registry transaction data has been summed to estimate transactions by Homes and

Communities Agency Operating Areas; these numbers should be seen as indicative only

The ten local-authority areas with the highest level of Help to Buy Equity Loan

activity, in terms of the number of transactions, are shown in Table 3.18. Many of

these areas are very large, so the actual number of transactions in relation to

population size is quite small. Table 3.19 shows high activity areas in terms of

number of transactions per thousand inhabitants. Most of these high activity areas

are fairly widely spread across the southern half of the country, although not in

London or the South East. The concentrations in these local authorities reflect the

current pattern of residential development and the availability of Help to Buy Equity

Loan-appropriate stock. The areas are small, so the number of housing starts per

quarter is also small.

Table 3.18: Ten local authorities with highest Help to Buy Equity Loan activity

by numbers of transactions based on mid-2014 population figures (as of 30

June 2015)

Highest-lowest by number of transactions

Local authority

Help to Buy Equity Loan

transactions as of 30

June 2015

Transactions per

thousand population

Wiltshire

990

2.05

Leeds

911

1.19

Central Bedfordshire

893

3.32

Peterborough

740

3.89

County Durham

726

1.40

Milton Keynes

724

2.79

Birmingham

706

0.64

Bedford

690

4.21

Aylesbury Vale

660

3.58

Manchester

603

1.16

Source: Help to Buy Equity Loan Transaction Data, Homes and Communities Agency, 2015,

unpublished management data; Population Figures, Office for National Statistics, 20

15c, data

published 25 June 2015

Table 3.19: Ten local authorities with highest Help to Buy Equity Loan activity

by numbers of transactions per thousand people based on mid-2014

population figures (as of 30 June 2015)

Highest-lowest by transactions per thousand

Local authority

Transactions per

thousand population

Help to Buy Equity

Loan transactions as of

30 June 2015

Corby

4.25

278

Bedford

4.21

690

Peterborough

3.89

740

Aylesbury Vale

3.58

660

Chorley

3.58

399

South Norfolk

3.56

460

Gloucester

3.52

442

Hinckley and Bosworth

3.41

367

Telford and Wrekin

3.37

571

Dartford

3.35

342

Source: Help to Buy Equity Loan Transaction Data, Homes and Communities Agency, 2015,

unpublished management data; Population Figures, Office for National Statistics, 20

15c, data

published, 25 June 2015

In Figure 3.15, the number of starts has been summed by quarter in these high

activity areas to show the trend over time. Since the introduction of Help to Buy

Equity Loan, there has been an upward trend in starts generally in these high activity

areas, albeit with significant dips around Quarter 4 of both 2013 and 2014, reflecting

seasonal patterns.

Figure 3.15: Private enterprise starts and completions in ten local authorities

with highest Help to Buy Equity Loan activity by number of transactions per

thousand people, 2010-2014

Source: author’s calculations based on Help to Buy Equity Loan Transaction Data, Homes and

Communities Agency, 2015, unpublished management data; Population Figures, Office for National

Statistics, 2015c, data published 25 June 2015; Starts and Completions data, Department for

Communities and Local Government Live Table 253a, data published 20 August 2015

A table summarising information on active developments in these high activity local

authorities is included in Appendix 3. In general, these local authorities have

ambitious growth targets and plans which encourage substantial house building over

the next 15 to 20 years. The active sites are mostly being developed by the major

developers, and Help to Buy Equity Loan is being widely advertised on most of them.

Perhaps surprisingly, the individual sites themselves are not very large, usually less

than 150 units and many below 100. Often, however, these smaller sites are being

brought forward as phases within larger schemes, including major urban extensions.

Table 3.20 shows trends in median house price in these ten high activity local

authorities. Between 2013 and 2014, prices rose on average by 6.5% in these

authorities compared with an average price rise of 10.5% over the same period

nationally.

Table 3.20: Price trends in ten local authorities with highest Help to Buy Equity

Loan activity by number of transactions per thousand people, 2010-2014

2010

2011

2012

2013

2014

Corby

124,995

119,950

119,850

130,000

132,250

Bedford

183,000

179,000

185,000

187,500

205,000

Peterborough

132,998

130,000

132,000

140,000

150,000

Aylesbury Vale

230,000

227,500

237,500

250,000

Chorley

150,000

145,475

150,000

147,750

154,000

South Norfolk

184,000

175,000

176,998

182,000

195,000

Gloucester

147,000

140,000

142,000

148,000

158,000

Hinckley and Bosworth

152,000

149,000

145,000

150,000

165,000

Telford and Wrekin

139,995

135,250

139,950

142,495

145,000

Dartford

187,000

185,000

196,625

200,000

220,000

Average across local

authorities

163,099

158,868

161,492

166,525

177,425

Per cent change each

year

6.50%

-2.59%

1.65%

3.12%

6.55%

Source: Office for National Statistics, 2015d, data published 24 June 2015

The Help to Buy Equity Loan data analysis shows clearly how and where Help to

Buy Equity Loan has impacted. It has supported the purchase of over 50,000 new

homes with a total value of over £12bn. The vast majority of sales (82%) have been

to first-time buyers. Most have been family sized homes with nearly 50% of Help to

Buy Equity Loan purchases being three bedroom property. There is some evidence

to suggest the proportion of family homes purchased under the scheme is growing.

The picture with respect to property sizes suggests that Help to Buy Equity Loan

may have allowed some first-time buyers to miss out the first step of a smaller home.

However in London in particular the emphasis is on smaller units.

Most households buying under Help to Buy Equity Loan had identified household

incomes below £50,000 and the average property price was £212,000 some £55,000

below the Office for National Statistics average of £267,000. Three quarters of

homes were priced between £100,000 and £250,000 and 87% below £300,000.

Some 838 developers have made transactions under the scheme along with 18

lenders. In both cases a small number of large firms dominate delivery. In the case

of lenders there has been some expansion of the market with reliance on the largest

mortgage lender falling from 85% of loans in Quarter 2 2013 to 17% in Quarter 1

2015.

3.5 Conclusion

Help to Buy Equity Loan has become a small but significant element of total

transactions, albeit with considerable spatial variations. There is evidence to suggest

it has boosted total output – starts in 2013 were a long way up on 2012 and in 2014

they were higher than 2013 (starts are chosen as our preferred measure of output

over completions which clearly lag).

The extent of the expansion in output varies greatly across the country with the

largest growth in the Northern and Southern Homes and Communities Agency

Operating Areas (representing between 3-5% of total transactions) where the biggest

falls were also seen after 2008 and the least in the London and East and South East

Operating Areas, (representing between 1-2% of total transactions) where output

levels were less affected. This tends to suggest that Help to Buy Equity Loan take-up

has been greatest in generally lower price and demand areas.

The evidence on local authority areas shows how significant Help to Buy Equity Loan

has been in specific local authorities, which were often identified growth areas.

Data on new mortgage loans by both number and volume show an upturn in 2013 as

do data on the number of loan products with higher loan to value ratios. Although

most are not for new build homes this rise has supported an increase in first-time

buyers as measured by both the number and value of new loans. Housing market

confidence in general also showed a slight increase, although confidence that it is a

‘very good’ time to buy has waned.

This secondary data analysis can provide some indications of how the Help to Buy

Equity Loan policy might evolve as the market changes through to 2020 and beyond.

We return to this issue in Chapter 6.

Chapter 4: Supply-side perspectives

4.1 Developer perspectives

We interviewed some fifteen senior executives from fourteen larger developers (in

one case we interviewed two people in order to obtain specific information about the

London market as well as the national picture) over the period from April to June

2015. These included the six largest developers in terms of the number of

transactions (in themselves covering almost 60% of transactions) and six of the

largest seven in terms of the number of active sites. The interviewees included both

national and regional developers across England - with the majority covering large

parts of the country but including some who specialised in two or three regions. As a

result we obtained information on developer experience in all regions as well as on

the national picture.

During May and June we also interviewed five senior executives from smaller

builders who were operating in one or sometimes two regions. One had not done

any Help to Buy Equity Loan sales - although they were closely involved in

discussions with the Homes and Communities Agency; one had done one sale; the

other three had greater experience of Help to Buy Equity Loan transactions.

Interviews covered four main topic areas: the firm’s involvement in Help to Buy

Equity Loan; the impact of the scheme on the firm’s own decisions; their

understanding of the impact of the scheme on the market; and how they saw the

future. While the responses all reflected the individual circumstances of the firms

involved – especially in terms of their experience since the crisis and the extent of

restructuring that this had generated – and somewhat different attitudes to the

specifics of the scheme, the overall picture was generally similar across the larger

developers. The involvement and attitudes of smaller builders obviously differed from

that of the larger developers with some of these differences reflecting the different

views of the trade bodies covered in section 4.4.

Involvement in Help to Buy Equity Loan

All the larger developers had been involved in Help to Buy Equity Loan from its

inception (or within a couple of months) and many had been directly involved in

discussions on the design and objectives of the policy. They had also been involved

in earlier government schemes of similar nature and involvement flowed from this

existing position. They had all remained in the scheme and expected to do so until it

finished – and to be part of any future policy initiative of a similar type.

All had transactions levels of a scale which made it a core element in their sales

strategies. All marketed the scheme using the logo on their web and their local sales

drives. They did not directly incentivise their local sales personnel to use the scheme

but all were well versed in the details. All had panels of solicitors and Independent

Financial Advisors who were highly experienced in processing applications. One of

the things that they most liked about Help to Buy Equity Loan was that there was a

strong national image into which they could tap in their own marketing strategies.

They almost all took part in road shows and other local and regional activities and

were in direct contact with relevant agents on a regular basis. In other words Help to

Buy Equity Loan was a core part of their activity; the processes mainly worked well

and they had senior executives who specialised in this element of their decision

making. (In most cases we were able to talk directly with this specialist).

Among the smaller builders registration tended to be later. This, in part, was driven

by their perception that the Homes and Communities Agency dealt first with FirstBuy

conversions and thus the major suppliers, and in part because they were coming

new to the scheme and took time fully to clarify whether it was appropriate to join.

They had not been involved in earlier schemes, seeing them as too restrictive and

complex for their needs.

All five were positive about registration for Help to Buy Equity Loan and thought that

it was potentially worthwhile for their own activities. They did not wait until they had a

specific transaction or scheme available before registering.

They used sales agents rather than having their own dedicated team and so were

one removed from the initial transactions process.

They remain in the scheme because they see it as valuable even when it has so far

yielded little or no direct benefit. This was seen to be because they have a small

number of sites at any one time, some may not be suitable and some, even though

suitable, have not attracted Help to Buy Equity Loan purchasers. They use the logo -

which is well recognised and therefore a useful marketing tool. They identify Help to

Buy Equity Loan as an option in site specific information. They are not usually

heavily involved in additional marketing. They intend to remain in the scheme in

some cases mainly because of the feeling of confidence that it generates.

Impact on firms’ decisions

Those who had been involved in First Buy had found it quite a difficult product to

promote. The restrictions made it more difficult to sell and the benefits were less

obvious to consumers. By comparison the Help to Buy Equity Loan scheme was

seen as much more desirable because it is simple and has few restrictions; because

scale has been built up relatively quickly and is marketed nationally and regionally to

a high quality which made it easier to focus their own marketing budgets, etc. These

benefits were seen as much greater for the large builders mainly because of scale.

Few small builders had experience of the earlier product and the main comment was

about confusion in terms of names, attributes, and regulatory and income

constraints. Overall this was seen as having the benefits of a market product but with

government backing. It was seen as quite distinct from affordable housing initiatives.

In all cases the large developers thought that the scheme had helped their own firm

both directly in terms of sales; had led to increasing output levels because

production is demand led; and had built confidence to invest in the future. Details of

how this worked in individual cases is discussed below. Among smaller firms the

direct help to their firm in terms of sales had been unpredictable - and in two cases

negligible/zero. However they all noted that the scheme had increased viewing

activity, awareness of new build and general confidence in the market so that they

felt that their firm had benefited from its existence.

An important issue for the larger developers was the extent to which Help to Buy

Equity Loan substituted for their own shared equity schemes. The position differed

greatly between different developers. A small proportion did not agree with the idea

from the point of view of the firm – sometimes using other approaches such as part

exchange. A significant majority had either introduced them after the crisis or greatly

expanded established schemes. Some of these had already been closed as the

backlog of unsold homes reduced; others were looking to close their own scheme

when Help to Buy Equity Loan was introduced because of their effect on the balance

sheet; still others were continuing but unhappy because of its impact on cash flow

and the capacity to buy land. A few have continued with their own schemes but at a

much lower level of activity. A number still market their own exchange schemes

which are not relevant for Help to Buy Equity Loan.

Among the smaller builders there was one that still ran a post-65 partial ownership

scheme but had closed their mainstream scheme. A number were attempting to get

people who had bought on their partial ownership schemes in the mid to late-2000s

to staircase out and were having considerable success. This they thought was

evidence that there might be less of a longer term problem than some commentators

suggest.

The most important finding here was that a significant proportion of the large

developers argued that they could not have maintained their equity loan schemes

and were looking to reduce investment activity at the time that Help to Buy Equity

Loan was introduced. They suggested that the fact that they have increased activity

rates should be measured against a projected decline rather than a stable level of

output at the introduction of the scheme.

From the point of view of developers the scale of success was measured first in

terms of the proportion of sales that were Help to Buy Equity Loan which was stated

among larger developers to run mainly between 20% and 40%.

The second measure was the proportion of those purchasing under Help to Buy

Equity Loan who would not otherwise have been able to buy. Here, developers

perceived that generally around 40 - 50% of Help to Buy Equity Loan sales would not

have translated into full market sales – mainly on the basis of deposit requirements

rather than income multiples. This is not to say that this proportion would never have

bought – rather that they were enabled to do so at that time.

A number of developers also stressed that people were often jumping a move – i.e.

buying an additional room which would allow them to get on with their lives, have

children, etc. A proportion of these clearly could have purchased without assistance

– although there is an issue about the range of sizes available within the new

construction sector as many developers did shift towards larger houses as a result of

the near closure of the first-time buyer credit market.

All noted that the vast majority of households using Help to Buy Equity Loan were

first-time buyers. However they also saw a role for the scheme for those wanting to

move up to family homes which was in some cases an important part of their market.

Overall the estimates for the net increase in sales ranged from around 10% to 20%

of total transactions within each of the larger firms - although these figures were

usually hedged around with comments about make-up, etc. These net figures were

seen as translating into new build because (except in the apartment market) starts

were closely linked to sales experience – i.e. investment was seen as almost entirely

demand led.

The impact on smaller firms was perceived to be much less. They often only had one

or two sites active at a given time and not all sites would have products suitable to

Help to Buy Equity Loan. The numbers involved were usually small and the learning

costs seemed high. Where sales did take place they stated that it had speeded up

development activity.

No interviewee mentioned any slow-down in sales with respect to non Help to Buy

Equity Loan sales. They all saw the market as generally on the upturn and although

there was considerable volatility, thought sales activity of any type helped to

generate more activity.

All the larger developers had directly increased their building programme as a result

of Help to Buy Equity Loan sales, as had three of the smaller developers. They saw

no difference between larger sites and smaller sites – although one smaller builder

felt he had the confidence to be involved in a much larger site than usual.

The main constraints were land availability and planning. Material shortages had

been relevant but were declining. This was to some extent seen as an outcome of

Help to Buy Equity Loan and the confidence it had generated – shortages were felt

to have declined more rapidly than expected. Labour shortages were still a major

problem in most areas and developers tended to see that as something which they

must deal with themselves. They agreed that they were increasing costs and having

some negative impact on output levels. Development funding remains an issue

especially for smaller builders. One argued that the game changer was not Help to

Buy Equity Loan but the Builders Finance Fund and that if this could be more readily

accessed, there would be greater impact.

The most positive statement made by the majority of larger developers was with

respect to land. They were buying more land because cash flow had eased in part

because of increased sales but also the removal or reduction of their own partial

equity programmes. They were definitely gearing up to continue expansion at current

rates or somewhat more rapidly. However many - large and small - were still

building below their 2007 levels and saw reaching this level as their immediate goal.

The biggest problem area was with respect to flats, especially in London. These are

generally sold off plan and often a year or more in advance. Three developers

stressed that this made it impossible - or nearly so - for Help to Buy Equity Loan to

play a major role, although one developer was holding back some units to be

marketed nearer the nine months (six for exchange) window.

In terms of prices they argued that Help to Buy Equity Loan had helped to firm up

prices rather than significantly to increase them. They did however suggest that

prices were now ‘cleaner’ with fewer white goods or other incentives.

There were spatial differences with developers in the North stressing more how

important the scheme was in generating sales, additional market activity and

particularly the confidence to plan ahead. London developers saw it as an important

scheme enabling people to stay in London and buy. They felt that sales were

inherently concentrated in some boroughs because the effect on affordability was

inadequate in higher priced areas. They also felt that success was limited by the

problems around effectively including apartments in the programme because of the

emphasis on pre-sales in that market. More generally, shortages of land and skills

and the complexities of large scale development were having a greater impact in

London than elsewhere in the country.

Overall the developers saw the second round benefits arising from increased sales

and the confidence that has been generated in the market as well as in their own

firms as starting to build. All expected growth and were making decisions to support

that growth. To some extent this clearly reflects pro-cyclical behaviour but there was

also a clear understanding among almost all the interviewees that Help to Buy Equity

Loan had made a significant contribution to this optimism.

Impact on the market

The interviewees all stressed the extent to which the scheme had improved

confidence in the market and therefore provided an incentive to expand both Help to

Buy Equity Loan and non- Help to Buy Equity Loan activity - even though the scale

of the impact was seen as considerably different between interviewees as noted

above (we are aware of one large developer whose view is that it has made no

difference at all but he is not an interviewee).

There was considerable agreement that Help to Buy Equity Loan had raised the

profile of new build as compared to the second hand market, expanding the

proportion of households prepared to consider new build and importantly bringing

them on-site so that they better understood how technology and design had

improved. Almost all the interest outside London and the South East was in

properties under or around £200,000 and the vast majority were first-time purchasers

(this is partly because of inherited knowledge of earlier schemes as there was seen

to be a clear market for movers on who would benefit from the equity share

principle).

Developers all saw it as valuable that it was not only for first-time buyers - in part

because it improved the mainstream ‘feel’ but mainly because it helped support the

overall marketplace. They also liked the lack of an income constraint. Almost all were

prepared, some even happy, to see the maximum price limit reduced from £600,000

to say £350,000. They thought this would reduce negative comment and make little

difference outside London.

London was seen as different both because of the difficulties associated with off-plan

sales of apartments and because of prices. Those working in London would ideally

want to see a regional maximum especially as most thought that the numbers helped

to remain in London who would not otherwise have been able to do so were

significant. No-one outside London was concerned by the nine month reservation

and six months exchange requirement.

Most said that they would have defined the scheme in the same way as the

government did, except perhaps they would have suggested a lower maximum

eligible property value. They felt that it had changed builder/lender relations to some

extent. They were critical of the general lack of lender interest in new build and

thought Help to Buy Equity Loan had helped to reduce that problem to some extent.

The growth in the number of lenders was very helpful and it was rare to find it difficult

to obtain a loan because of lender concentration on site.

They mentioned their concern about the problems that arose when the Halifax

changed their rules. Some thought Help to Buy Equity Loan had made the lenders

more conservative and might have reduced innovation. However most saw the

system as working well and becoming more streamlined, so were more comfortable

than they had been in 2013. They mainly saw no change in investor builder

relationships. There were a couple who had been restructured who were limited in

their capacity to grow but this was not Help to Buy Equity Loan related. Mostly

Boards saw Help to Buy Equity Loan as an important nationally recognised scheme

and wanted involvement. Others were their own masters and therefore happy with

the relationship.

Overall, therefore, Help to Buy Equity Loan was an important, although not always

an overwhelming, part of the market. Interviewees saw it as difficult to separate its

impact from that of more general confidence - but almost all thought there was an

important impact most notably on land acquisition, starts and numbers of active

sites. They were generally happy with the form of the scheme from the point of view

of the market - and certainly as compared to earlier or industry schemes. In

particular they liked the simplicity and comparative stability of the scheme.

Looking to the future

There was considerable disagreement about what the longer term future of the

scheme should be but far less so in relation to the next five years. Most said they

had made plans on the basis of the scheme continuing basically in its current form

for the next five years – and one said that ‘shivers went down my spine at the

thought that post-election it might not’. A number also noted the negative impact in

Scotland when financial constraints started to bite.

Concern was not just about their own firm’s business planning, notably with respect

to land assembly but also because of market confidence. Any changes were seen as

likely to have a negative impact. Fundamentally developers saw Help to Buy Equity

Loan as helping to stabilise the market by providing a sort of safety net. By

implication they would expect the proportion of Help to Buy Equity Loan to be lower

in higher demand areas and to decline as a proportion, although not necessarily in

total, if the overall housing market continues to pick up.

There were two camps with respect to whether it would continue to be necessary to

support the market. A minority suggested that as the economy and confidence grew

the demand for partial ownership products would diminish and there would be a

natural end to the product. None thought this position had yet been reached, and few

thought it would be reached by 2020/21.

To the extent that there were views about which parts of the market would continue

to benefit, these mainly stressed that first-time buyers looking for properties below

£300,000 and usually below £200,000 or in some cases even £100,000 would

remain the mainstay of the Help to Buy Equity Loan market. At the other extreme

there were developers - again a minority - who wanted the scheme to become a

mainstream product which effectively shares risk but which should have little net cost

to the government (and maybe even make a reasonable rate of return).

The extension to 2020/21 was therefore almost universally welcomed except by a

couple who thought that phasing out could begin a little sooner. There was a small

group who thought the industry needed to be weaned off government involvement -

but gently. The extension had certainly changed decisions and enabled developers

to use cash to purchase more land for future development. But the fundamental

remains that for most types of development, regions and developer starts are

demand driven so it is speeding up new build sales overall thus generating an

increased pipeline that is all important.

As a result most developer interviewees wanted to tell the Chancellor or minister to

keep everything steady at least during the current Parliament. They wanted more to

be done to streamline the planning system and to overcome development funding

constraints. Smaller developers intended to continue to take part even though they

often felt they had seen little direct benefit. In addition developers saw Help to Buy

Equity Loan as potentially a positive element in reducing volatility in demand over the

next cycle. This in itself would help to maintain more consistent and higher levels of

output.

Finally very few saw significant problems when people move on as they felt that

incomes and prices would have risen enough to make it possible. There was some

concern that people would have forgotten the specifics of the scheme and therefore

would feel they had lost out if prices rose. They therefore thought it extremely

important that purchasers were kept fully informed in an easily accessible way on a

regular basis.

Conclusions: developers

Developers were generally very positive about the scheme and saw it as having both

direct and indirect benefits. Without the scheme it is highly likely that starts would

have declined in 2013 and 2014 because larger developers were running out of

capacity to fund their own partial equity schemes or indeed to fund land purchase.

Developers regard Help to Buy Equity Loan sales as on a par with market sales.

They have accounted for significant proportions of their sales since the scheme’s

inception. Given the demand led nature of their business a sale generates a start, so

the scheme has helped to increase investment by at least the number of sales taking

place. Indeed the secondary evidence suggests that starts began to run ahead of

sales to a very considerable extent in 2013 and 2014 at least partially as a result of

increased confidence and improved cash flow with the result that they had expanded

investment more quickly and consistently. Their better cash flow position has also

enabled them to buy land further to increase starts into the future.

Smaller developers feel they have found it harder directly to benefit from the scheme

but where they have made sales this has generated higher output levels and some

expansion in capacity.

Developers particularly liked the Help to Buy Equity Loan because it was simple and

market led. They were happy to see it continued in its current form, although most

thought a lower maximum value, especially outside London would be acceptable.

They welcomed the extension until 2020/21 and saw little difficulty for customers in

moving on when they chose to do so.

4.2 Lender perspectives

Introduction

Telephone interviews were conducted with 10 lenders - 8 were active participants in

the Help to Buy Equity Loan scheme and 2 were lenders who had decided not to

participate. Of the 18 lenders currently in the scheme we chose to interview the 8

lenders with the biggest Help to Buy Equity Loan portfolios. In terms of selecting

lenders not in the scheme we simply chose the largest lenders who remained

outside of the scheme. With assistance from the Council of Mortgage Lenders we

were able to identify the key contact inside each lender and to make a request for a

phone interview lasting up to 45 minutes. All the lenders approached agreed to

participate. A semi structured questionnaire, developed in conjunction with Council of

Mortgage Lenders and the Department, was sent in advance of each interview. No

individual person or lender is identified in this report.

Why entered and when?

Generally those in the scheme are committed to supporting first-time buyers -

especially those with smaller deposits and the home ownership market. A number of

participant lenders have a strong track record for supporting government schemes

and this has been re-enforced in specific cases by the government’s shareholding in

the banks concerned.

In terms of giving support to the new build market, the picture was more mixed.

Some saw it as helping drive the economy, others as supporting existing strong

relationships with developers and others as an opportunity to grow their new build

books/exposure in what was likely to be a growing market. There has been a long

history of lender concerns about the new build market (new build premia, quality of

homes, sales processes). A small group of lenders have embraced this market fully

over the decades and appointed staff to service it and developed strong relationships

with builders and other lenders have now followed that lead. However some lenders

have stood back - with continuing concerns about the valuation of new build homes

and the sales process.

This scheme has 18 lenders out of a total of around 120 residential lenders. Some of

those other 102 lenders fund new build purchases but very much as part of a

business relationship rather than an active attempt to create a new build specialism.

Part of this relates to scale and likely market share. New build is a small part of the

total housing market (roughly 10% on an annual basis) and this segment is

dominated by two national lenders.

All of the broker and advice elements of new build market are aligned to this

dominance and given the strong sales incentives that exist in the builder sales

offices there is a natural tendency for business to be focussed in the direction of

these two lenders. For new lenders entering this market decisions have to be taken

as to whether the likely business to be generated can justify the considerable set up

costs to secure it. Without doubt the Help to Buy Equity Loan scheme and its

predecessors related to new build have helped bridge this gap and generated more

positive relationships between the two sectors - increasing lender appetite to fund

new build mortgages. Problems remain but substantial progress has been made.

Current participants varied in terms of the speed with which they had signed up to

Help to Buy Equity Loan – some joined immediately after the Budget 2013

announcement reflecting their existing engagement with First Buy and NewBuy

and

existing corporate policy but others took a little longer in order to get the assurances

required and to sort out systems requirements. It was also important to get complete

clarity from the Prudential Regulation Authority/Financial Conduct Authority

regarding how equity loans might be treated in terms of both capital and conduct

requirements.

For non-participants, systems and business models dominated the reasoning for not

going forward along with the costs associated with overcoming/changing these. One

non-participant lender felt that it was easier and quicker to go to the market with

Introduced in 2011 the Firstbuy scheme was similar to the previous Homebuy Direct scheme which came to

an end in 2011. Qualifying households with an income of less than £60,000 and a deposit of 5%, were given a

20% equity loan co-funded by house builders and the government. The loan was free for the first five years and

repaid on the sale of the property. It ran until 2014. NewBuy began in March 2012. It was a mortgage

indemnity scheme aimed to assist potential buyers of new build homes, who have less than a 10% deposit but

would otherwise be able to afford monthly repayments, and boost housebuilding activity. Lenders entered into

agreements with participating builders and advanced indemnified mortgages of between 90-95% loan to value on

new-build homes in England. The builder paid 3.5% of the sale price from each property into an indemnity fund,

with government providing a further guarantee of 5.5% of the sale price. NewBuy protected the lender in case

the borrower falls behind with their mortgage payments and the lender has to repossess the property and sell it.

In that event, the scheme covers that lender's losses, up to 95% of the sale price. These mortgages will be

underwritten and administered in the usual way and borrowers will still be liable for shortfalls should the lender

wish to pursue. The scheme ran until March 2015.

standard products and stay within its current risk appetite and both non participant

lenders interviewed felt their organisations processes and policy were more easily

aligned with the government’s Help to Buy mortgage guarantee scheme.

In terms of restrictions imposed by current participants there was some variation as

to how these were applied. For a number there were no limits other than typical new

build exposure limits in relation to specific sites, individual developers and new build

development overall. Lenders set site limits for lending in general, typically no more

than 20/25% of site or a post code though it was hard to enforce these. For some

their market share was well below the risk controls in place.

In terms of loan to value caps and other limits this varied by lender – one had limits

of 85% on new build houses and 75% on new build flats and another was currently

using a 80% limit on houses but was likely to move that upwards. As this suggests

competition, experience and confidence all played a part in how individual lenders

approached the new build market.

The other obvious variation between lenders was whether they were offering their

standard product range to Help to Buy Equity Loan purchasers or had a specialist

range of products. As is evident from comparison sites (eg,

http://www.money.co.uk/mortgages/help-to-buy-mortgages.htm) this can mean that

Help to Buy Equity Loan borrowers may be paying higher rates than if they were

buying an equivalent second-hand property using a similar ‘mainstream’ mortgage

and this has been an area of tension with developers.

Some lenders have clear policies about all borrowers having access to all products

whereas for other lenders, systems make it easier to offer a special range for these

buyers and this also helps on the administration of the scheme. The other factor to

weigh in this is how lenders assess the credit risk – typically Help to Buy Equity Loan

purchasers are putting in a 5% deposit with the consequence they will be treated as

95% loan to value borrowers even though there is a 20% equity loan in place.

Core concerns

It was quite clear most if not all participant lenders are comfortable with the scheme

from a lending point of view, ie, they will get their loan back. However at the outset

there was real concern about the complexity of the scheme from a borrower point of

view and whether borrowers understood their obligations – moving from interest free

loan to one with interest and repaying an equity loan which is based on a % of the

sold house price. It was noted that the standard Help to Buy Equity Loan buying

process includes a personal worked example for each buyer and their

solicitor/conveyancer gives an undertaking that they have explained the scheme to

the purchasers. There is also a Homes and Communities Agency buyers guide (see

http://www.helptobuy.gov.uk/docs/default-source/default-document-library/help-to-

buy-equity-loan-buyers-guide.pdf?sfvrsn=4).

Use of the Help to Buy Equity Loan is promoted by a developer’s sales office (with

staff getting substantial incentives to sell the home) and is typically advised through

a developer- preferred specialist new build Independent Financial Advisor (eg, New

Homes Mortgage Helpline, New Homes Mortgage Services) and solicitor both of

whom will be expert in this scheme and attuned to the developer’s need for a rapid

service. Reflecting these arrangements some lenders were concerned that

borrowers might not always get the advice they need and might not fully understand

what they have signed up to. However solicitors must sign off on the buyer’s

understanding and in addition borrowers receive an annual statement regarding their

outstanding equity loan liability.

Of course the borrower has to be approved via the Help to Buy Equity Loan agent on

behalf of the Homes and Communities Agency and that along with other safeguards

gave lenders some comfort that the customers would be eligible and thus they were

not lending to people who should not be in the scheme. However borrowers did

come down what, for most lenders, was an unusual route and there were some

concerns that perhaps some of the checks and balances in the normal mortgage

advice process were less obvious in this scheme. Moreover, as more than one

lender noted, whereas under First Buy the developers had ‘skin in the game’, (ie,

they provided half the equity loan), under Help to Buy Equity Loan they had none.

These concerns then flowed into a wider discussion about the targeting of the

scheme and questions whether it was open to abuse with customers taking

advantage of a five year interest free equity loan regardless of whether they needed

it or not. At the same time, lenders recognised this was about demand and that the

focus was on ensuring more homes were built along with delivering increased

transactions and vitality to the housing market.

One lender had a longer list of concerns on the set up that included the regulatory

treatment of the equity loan (now resolved) and what the lender saw as a fudge in

terms of the scheme focus – in the lender’s view the scheme was an affordable

housing proposition rather than a new build proposition with the equity loan existing

to ease access for first-time buyers and providing in his view an extreme stretch in

some cases. This lender, like some others, offered access to standard products

rather than a special range and as a consequence its loans were super competitive

in the market. This meant it had to manage its exposure very carefully.

The same lender felt that NewBuy was a better scheme in that it had the same 5%

deposit but without the Help to Buy Equity Loan incentives for the builder to perhaps

set a higher price for the property. A third concern was the length of time the scheme

was proposed to run for. The view was that the longer any such incentive schemes

run for the more they damage the market by creating dependency by both

developers and consumers (let alone ‘the ticking clock’ on the interest due on the

equity loans and their repayment).

Some of these issues also acted to deter non-participants. They were also worried

about the parallels with interest only loans market and overall complexity of the

scheme. It was easier to pursue their goals of support to first-time buyers outside of

the Help to Buy Equity Loan scheme.

When asked if any concerns remained, for some lenders, the answer was a clear

yes arguing that some of the initial concerns set out above remained. There was a

deep concern about shared equity and how that would work out in practice and not

least in the context of continued price inflation plus the fact it was excluded from the

affordability calculation at the outset.

However this was not universal. Other lenders felt that the quality of the borrowers

was good, that they had seen no inappropriate behaviour by developers or their

agents and that there had been no obvious price inflation. There were continued

misgivings as to possible mis-selling with this centred on the advice given and the

perceived lack of borrower understanding of their loan arrangements (even though

the consumer survey discussed in Chapter 5 indicates that consumers did not share

these concerns when interviewed).

There was also continued concern about when the scheme might be withdrawn.

Having said this, most lenders involved in the scheme were also active in

Wales/and/or Scotland though this was not universal at present. Some needed to

invest in staff and resources to do so. Two lenders had been forced to limit their

exposure as they were getting too much business and it was clear from others that

there was a strong appetite for funds in both of these countries.

Patterns of Lending

The number of completions by lender varied considerably reflecting the time they

joined, market shares and the size of the organisation. The detailed lending figures

are already available to Department for Communities and Local Government /Homes

and Communities Agency. Given that diversity, averages are a little misleading but

the data suggests the following;

Table 4.1 – Detailed lending figures

Ave

loan to

value

Ave income

% First-

time

buyer

Ave loan

Lender 1

73%

£48k

73%

n/a

Lender 2

72%

n/a

72%

£168k

Lender 3

75%

n/a

78%

n/a

Lender 4

72%

n/a

£156k

Lender 5

76%

n/a

70%

n/a

Lender 6

71%

£45k

87%

£145k

Lender 7

75%

n/a

50%

£190k

Lender 8

70%

£42.5

87%

£143k

Source: Lender Survey; spring 2015

Typically borrowers have a 2 year fixed rate mortgage. Some lenders are concerned

they are ‘overweight’ in new build and Help to Buy Equity Loan relative to their

overall market shares. There is some degree of concentration in London and the

South East.

Most participant lenders felt the quality of the Help to Buy Equity Loan borrowers

were very similar to their general first-time buyer borrowers while noting there was a

higher application to completion ratio – ie, more completed.

Lenders were generally very satisfied with the quality of the Help to Buy Equity Loan

customers. One lender noted that the quality was ‘very good as priced close to 75%

loan to value products rather than 95%’ while another commented ‘quality was

slightly lower but overall very similar from a pricing perspective’. Because of the mix

of bigger homes and the weight of second time buyers this lender also noted the

potential loss given default would be higher. A number of lenders held the view that

there were households in the scheme who could have afforded to buy without it – at

least as measured by their own credit assessment processes. Some borrowers had

clearly moved to take advantage of these 5 year interest free equity loans.

The general view was that the scheme didn’t pose any major problems aside from

the concerns about understanding and the quality of the advice given. Lenders were

clearly tracking performance closely, partly aided by the data collection underway as

part of the Homes and Communities Agency lender dashboard data. For lenders it

was still early days in the life of the scheme and the equity loans.

However, one lender noted that Help to Buy Equity Loan arrears were twice as high

as standard business and this reinforces concerns around the sustainability of the

price of the homes. It was argued by one lender the scheme was a sales mechanism

supporting new build and as such was a price maker generating a false market.

Though cover for the lender was deep it raised questions about cover for the

government and the buyer. Another lender had undertaken a full review of its lending

at the end of 2014 and was very confident as to quality and its alignment to the

overall risk appetite of the organisation. A number of lenders flagged up the

difficulties re-mortgaging may pose and not least when the borrowers want to borrow

more to pay off the equity loan (see below).

The question of consumer understanding was a central concern for lenders which

may be allayed by the results of the consumer survey in Chapter 5 albeit this was

focussed on current understanding. Issues raised included conduct risk around

lenders agreeing a plausible repayment plan after the first charge was repaid and

whether borrowers have any recall of the mortgage interview (with one lender

recalling the sale of endowment policies where customers agreed and then said they

had no knowledge of the discussion) and/or get whole of market advice. Despite all

the mechanisms and processes in place, the fact that many loans may be in place

for a long time and the equity loan liability could be substantial was sufficient to

remain a deep seated cause for concern not least because the lender would the

obvious party to blame.

The tie in between the developers and specialist Independent Financial Advisors

was mentioned more than once. It was clear a lot of thinking had gone into this area

but a number of lenders did feel it was possible that borrowers did not fully

understand the scheme, a view point at clear odds with the results of the consumer

survey as already noted. The burden of ensuring good advice was given was felt to

sit with the Independent Financial Advisor and the Help to Buy Equity Loan agent

(though that was not the view of the Help to Buy Equity Loan agents). Lenders were

re-assured the Help to Buy Equity Loan agents covered off the risk that the wrong

people were in the scheme and that more than one suggested they played a key role

in helping ensure borrowers understood it.

However another made the point that, at the end of the day, they were still

customers of the lender. One lender did independent customer research on this and

fine-tuned its literature as a consequence. Another was planning to call customers

on the maturity of their loan to discuss their loan arrangements. A third worked

through an extensive checklist of the issues including;

• Do borrowers understand the risks related to buying new homes –if they try to

sell soon after purchase – new build premium etc ?

• Were borrowers aware of the difficulties of re-mortgaging with another lender?

• Will borrowers be able to borrow more/make improvements?

• Has the borrower considered buying out the Equity Loan and if so how?

• Does the borrower understand the Equity Loan may make it harder to move to

a larger home in a rising market?

• How careful was the borrower to ensure the price was not inflated by the

scheme arrangements?

Finally, though an exemption was granted by the Financial Conduct Authority under

Mortgage Market Review to allow lenders to ignore the equity loan in their

affordability assessments the issue of its repayment resurfaces under the new

European Mortgage Credit Directive. Although public sector schemes are exempt

under Mortgage Credit Directive lenders remain concerned about possible public

outcry when these equity loans start being repaid and the reality and scale of the

obligation becomes clear and how that might shape regulatory responses at that

time.

The question of re-mortgaging and portability was one lenders recognised. Some

suggested it would not be possible to re-mortgage with other lenders as they would

not accept the equity loan and the borrowers would not pass their affordability tests.

Some might deal with requests on an exceptions basis and might do like for like

though only if the equity loan was paid off.

At the time of the survey a number of lenders were not offering to re-mortgage Help

to Buy Equity Loan clients from other lenders – some were not ready in systems or

policy terms (having made amendments for Help to Buy Equity Loan they then had

to revisit this and question of time/priorities; in policy terms the re-mortgage had to

meet standard re-mortgage/equity loan thresholds (< 15% of value) that have been

set) rather than not wanting to and indeed some of these were already re-mortgaging

on the guarantee scheme. There was an appetite for scheme guidelines around re-

mortgaging and one lender had already worked with the Homes and Communities

Agency to understand the process and put in place the options. Recent evidence

suggests more lenders are moving to accept remortaging customers from other

lenders.

On arrears it was early days though these were happening but because the loans

were recent the exposure was modest.

As noted earlier, lenders varied in the extent to which they had created specific

products or allowed Help to Buy Equity Loan borrowers to access their full range of

products. Most had developed specific ranges and all had incentives of one sort or

another including no application fee, free valuation, cashbacks and free legals.

Where a lender simply offered access to the full range of products it often meant

these were very competitive with the rest of the Help to Buy Equity Loan market.

This did mean they had to manage demand carefully.

Views on what has been achieved

Responses varied on this. One lender saw the benefit more about lending to low

deposit customers than lending on new build but others were more positive seeing it

as both or indeed principally about new build. It has led to lending firms building

stronger capacity for working in the new build market which was recognised by some

lenders to have been underserved. This has rolled out to the wider new build

market. With greater activity has come greater understanding and one lender felt this

had eroded some of the concerns about new build valuations. Some noted they had

extended their offer period for loans to 6 months from 3 months to help developers

and borrowers.

With respect to the Help to Buy Equity Loan agents these were a considerable

source of comfort as this dealt with eligibility questions and thus removed one source

of risk. There was some indication lenders felt that customers were also better

informed as a consequence. There was considerable satisfaction with the role

played by the Homes and Communities Agency.

In terms of whether participation in this scheme impacted upon other schemes

supported by the lender, generally the response to this was no. Some lenders were

not involved in the shared ownership market but it was recognised that Help to Buy

Equity Loan will impact upon that market as it would, for some customers, be seen

as an affordable housing option. However lenders generally saw this as a market

product rather than an affordable housing product so the clash was avoided. One

lender suggested it has reduced its appetite to do NewBuy loans.

On the question of whether it had led to more new homes being built some lenders

opined that we will never fully know. There was general recognition that the scheme

had assisted the credit market and consumer confidence. Some felt that Help to Buy

Mortgage Guarantee had the bigger impact.

Others suggested that though there was limited evidence of a large uplift in output

but then posed the counterfactual of what if it hadn’t existed? It was recognised

developers had rebalanced books and become profitable and this had fed into more

expansive plans, albeit the market was still ‘fragile’. However was there a pro rata

increase reflecting the investment? And should developers have done more

regarding supply rather than boosting profitability? It was suggested it had also

helped lenders back into higher Loan to Value lending.

One lender was firmly of the view the scheme worked on the demand side but not

the supply side. Another asked whether it has influenced the type of properties being

built (and how many were sold to investors rather than home buyers).

The estimates as to how much new build development had increased varied greatly

from 0 through 10% of new supply, (reflecting views of resource constraints –

materials, labour, land) with most but not all thinking 25% was too high. It was

argued that it would be difficult for the top 3 developers to sustain the growth they

had achieved and thus a question as to what might happen in the future?

Broadly what had happened to date was in line with what might be seen as a typical

five year plan for a recovering market – slow but steady growth. Some developers

were refinancing their own Shared Equity loan books. The recent reduction in output

was noted and it was suggested that what we had been seeing was in part simply

bringing forward plans rather than an overall sustained increase in output. If output

increased too quickly prices would stabilise/fall so why would developers do this?

We return to this question of additionality in Chapter 6 where we summarise

developer and lender views alongside further assessments of the impact of the

scheme.

How important is it that the scheme is extended to 2020

Lenders noted the considerable dependency many developers had on this scheme

(up to 50% of sales) so early withdrawal could have negative consequences for

home owners and the market. Others asked why 2020 and not 2025 or even does it

need an end date? It could be managed by incremental changes in policy and

criteria – the top 20 developers are already less dependent (?) and it would seem the

market was ending up with a ‘hard core’ group of developer users.

This prompted one lender to ask the question do we need the scheme – who needs

it? Does the market need it anymore? Why should buying be favoured over renting?

Developers have stepped back from their own shared equity programme and Help to

Buy Equity Loan was not seen as a vote winner. There was a need for an Equity

Loan repayment vehicle and there was concern there was no ‘drop dead‘ date for

exit from the Equity Loan. It was argued the scheme should not be permanent and

the government needed to be much clearer as to what the needs are?

Another lender suggested we might need to keep it going though he saw that as a

question for developers. In terms of lending the market was heading back to 95%

Loan to Value mortgages to a degree and even though that would not be all lenders

some were going there. A Mortgage Insurance Guarantee scheme or government

scheme would help here – without it 90% loan to values would be the market

maximum for many (but not all) lenders on second hand homes.

The risk of withdrawal of Help to Buy Equity Loan was the cliff edge effect which saw

transactions brought forward to qualify and then a period with very few transactions.

Interviews were conducted before the announcement to extend the scheme to 2021 and thus asked

respondents about extension to 2020

A third lender argued it should not be extended and that there should be a proper

discussion as to why lenders will not lend to low deposit borrowers and new build.

This lender did not like the scheme’s impact upon developer/consumer behaviour

and the distortions it generates. The lender suggested that the whole area of new

build needed rethinking and not least its dependence upon commission. He wanted

to see a much more professionalised market. Finally another lender argued the

priority was to invest in capacity to build – confidence was back but capacity wasn’t.

All lenders expected to stay in the scheme to conclusion though with some marked

variations in enthusiasm and subject to the performance of the portfolio. Two major

lenders had previously reduced their scheme appetite and overnight this had

impacted on quoted stock market valuations of developers. These had since been

restored but it did highlight the sensitivities that exist.

On the question of ‘If this scheme hadn’t existed how might the new build market

have evolved/’, ‘painfully slowly’ was one response - a view echoed by many of the

respondents. This would have meant more reliance on developer shared equity

schemes and all the balance sheet constraints that involved though as another

lender suggested the equity loans could be packaged up and sold off. However such

schemes would now be caught by the new second charge regulations and this was

now a regulated market so this would affect market appetite/capacity.

There was concern that Help to Buy Equity Loan lending was very concentrated

amongst a few lenders and that it was difficult to break in as the broker panels were

controlled by developers and they had well established favourites where they put the

business. Another lender suggested it was no longer needed and preferred simple

mortgage guarantees for high loan to value loans which could be properly priced and

volume controlled via the credit score. The scheme had certainly helped get some

lenders into the new build market and without it that would have been slower and

more cautious.

It was suggested the scheme had resulted in more family homes instead of one or

two bed homes and this slowed increasing overall output. There was a concern

about staircasing and the equity loan and questions around whether the scheme was

raising a question about whether you owned your home if government had a 20%

stake.

Mention was made that First Buy was a better scheme – well targeted and more

sustainable while another lender preferred NewBuy which he felt achieved better

sales standards. The lender felt Help to Buy Equity Loan had done nothing to

encourage a better new build market and though it gave lenders protection an

opportunity had been missed – citing, for example, the fact that buyers did not see

service charge details despite the Office of Fair Trading code of conduct on this.

For the lenders not in the scheme both accepted that in terms of whether they could

be involved was wrapped up in issues around timing and stage of business

development (bearing in mind this is a broker led market). Both firms had other

priorities at present and in one case preferred shared ownership to shared equity.

Both did lend on new build homes (aside from studios in one case). There were

concerns about the new build premium and one lender valued new build on a second

hand basis.

Their experience suggested the new build market performed slightly worse than

existing homes. Both agreed increasing supply was important. One was concerned

about policy consistency and market volatility with the continuous mismatch between

demand and supply. The other was exploring the broker market. Both had a positive

outlook on the scheme and in combination with the guarantee scheme. They agreed

there had been a boost to supply and confidence though one thought the guarantee

scheme had the bigger impact.

Conclusions: lenders

The lender interviews certainly provide a mix of messages. They were clear that the

scheme has had positive effects but like all schemes there were both initial and to a

degree continuing concerns. There can be little doubt that it has helped progress

lending into the new build market and perhaps one question for the future is how that

process can be further enhanced and developed. Given that new supply is a clear

priority then so to should be the question as to how to make that well supported by a

fully functioning new build mortgage market. There is a case for further thinking

around this point.

4.3 Help to Buy Equity Loan Agent perspective

As part of the programme of research we interviewed all the pre-sales agents

(although not the post-sales agent). Responses to these interviews are summarised

in the following section.

Original contracts

Most had previously been agents in the First Buy/HomeBuy Direct schemes from

earlier in the 2000s. Some saw it as prestigious; others more simply ‘what they do for

the association’. They already had established links with developers, local authorities

and others (eg Armed Forces) with teams in place and saw it as a mainstream

activity which was commercially driven and which they wished to continue.

There had been some streamlining especially in the last bidding round and a number

felt that the margins were now very tight. Most were positive about the level of

activity - which helped spread their costs. However one agent mentioned sales had

been lower than expected, although this might have been a region specific comment

and possibly related to weather.

The agents surveyed expressed some concern about how the initial bidding process

to become an agent had worked and the limited time they had had to gear up,

especially when the area covered by their contract had changed. Costs were more

tightly controlled, making it more difficult to do more than the basic minima and there

were often only a few days to put everything in place. This has now improved,

although it was noted often how difficult it was to deal with seasonal volatility at the

same time as keeping costs down.

One agent added that their contract (the agent’s) was only for two years. This

inhibited investment in IT/Website, etc. There was an option to extend but it was

suggested it would be better to give a five year contract at the outset (although it was

recognised this was not possible because the extension of the Help to Buy Equity

Loan scheme itself was a post-election issue).

The role of agents

In the main their business was via the developer/developers’ Independent Financial

Advisor. Most agents did roadshows usually with developers (attracting considerable

attendance – one agent stated that 1,000 people attended an event) and thus had

direct contact with potential customers (and with lenders/developers/ Independent

Financial Advisors etc). One agent said that half of their customers phoned them or

otherwise contacted them directly, but this appeared unusual.

One agent had surveyed roadshow attendees and of the 800 surveyed, a third were

interested in all schemes, 15% wanted only an equity loan, and 28% wanted shared

ownership. The agent aimed at generating 50% new buyers, and 66% of clients

were not previously registered with the association. The agent estimated that 70% of

buyers came via developers and 30% via shows.

Most agents saw the process of marketing as a national one through TV, the logo

and other identifiers as well as through the developers themselves. Agents marketed

to the association’s existing client base. One agent undertook a tailored ‘e-marketing’

campaign aimed at all the people on their shared ownership waiting list and to their

tenants. The agent also did Facebook advertising and held a big one-day show.

Another had an animated film and a number had put their own resources into

additional marketing. Even so, all saw it as a predominantly developer led process

with the open nature of the scheme making it far easier and less bureaucratic than

earlier initiatives.

In terms of their role with consumers most said it was a straightforward bureaucratic

process with very limited consumer contact – basically the agents were

checking/processing applications for eligibility. The face to face contact was mainly

at the shows. Agents agreed that most consumers had no idea about the

agent/association role, nor about what information should be sought from the agent.

Some agents said that they checked the consumers’ understanding of the suitability

of the scheme for their individual circumstances and tried to supplement information

where appropriate. All Agents provide the Homes and Communities Agency buyers

guide and a personal worked example to each applicant.

There was some concern about the process by which consumers obtain information

which was seen as a bit hit and miss – most consumers were informed about the

attributes of the scheme via the Buyers Guide but in terms of options and choices,

the agent view was that not all consumers may have a full market picture via their

interaction with Independent Financial Advisor. This was seen as the solicitor’s role,

although it was not clear to agents how well that worked. A number stressed that

things went much better when the solicitor had experience with the scheme. One

agent sent out a follow-up survey post completion to see how it had gone for the

consumer and the feedback from consumers was very positive.

The Independent Financial Advisor sends the agent the forms and the agent

confirms authority to proceed or not back to the Independent Financial Advisor and

the solicitor. The solicitor then comes back after the mortgage offer and the agent

gives permission to proceed (authority to exchange). Agents noted there were often

mistakes by the solicitors in the paperwork. However all commented that there was

only a small drop off in applications following the Authority to Proceed. It was agreed

that although there was no obligation to use the developer’s Independent Financial

Advisor or recommended solicitor many consumers did partly because these firms

knew the scheme and the developers often provided information, making it easier to

use that option.

As one agent commented this scheme has allowed some households to move one

rung higher up the ladder –‘instead of buying a three-bed and moving in five years’

time, they can buy a four-bed and avoid the cost of moving’ (the secondary data

suggests that purchasers are much more likely to buy a three-bed property; almost

half of the transactions were for a three-bed home, while just under a quarter were

for two-bed properties).

The links between agents and developers were closer, talking all the time via

stakeholder managers (at least with those with larger numbers of units). Agents

noted the process was led by the developer and their sales teams. A number of

agents commented on the trust built up with the developers and the

newsletter/seminars they ran for them. On the other hand the agents found the

performance of the Independent Financial Advisors and solicitors quite varied. Links

with lenders were limited – ‘remote’ in the words of one agent. It was mainly via the

Independent Financial Advisor.

The strengths and weaknesses of the scheme

In marketing terms the central promotion was seen as powerful and high profile.

There was good brand awareness. National TV advertising had been helpful

especially because of the simplicity and consistency of the scheme. However,

labelling two distinct products as Help to Buy has caused confusion for many and it

has been difficult to ensure everyone understands.

The use of e-marketing and social media (twitter/Facebook) increased quickly as

most customers were between 20 and 40 years old. Having a total of seven Help to

Buy Equity Loan agents worked well as did the use of more traditional marketing.

One agent had a Help to Buy Equity Loan magazine which was mailed to all Help to

Buy Equity Loan users, shared owners, local authorities and associations. Others

stressed the consistency of the advertising and its value. It was clear some agents

felt not all customers understood what options/choices they had and that some might

have chosen shared ownership if there had been available options.

The sales process was seen as robust but sometimes agents felt it was too strict

with numerous references back to Independent Financial Advisors, solicitors or

developers – one cited that 46% of errors were due to solicitors. Developers’

recommended solicitors were often better than the open market choice – they made

fewer mistakes as they had more experience and understood the process better.

The situation was similar with builder panel Independent Financial Advisors–

although here there was less direct contact. Another agent noted it was difficult to

get solicitors to understand the importance of accuracy. The date of the Authority to

Proceed was often missing, not cross checked and there was lots of ‘to-ing and fro-

ing’. One agent ran seminars to help the solicitors.

There were also post completion paperwork delays at the Land Registry/solicitors,

and agents had to have a full set of documents – Land Registry document, Equity

loan document, etc. – before their job was completed and they were paid. Another

agent sent all buyers a welcome letter setting out terms and details, as did the post-

sales agent.

A third agreed that agents were not heavily involved in sales. That agent noted that

developers push the applicants for deposits (minimum £500 – if applicant does not

qualify they get it back –but it also helps the affordability calculation).This was not

mentioned by others.

The success of the scheme

Agents gave a mix of responses from ‘very successful’ to rather more qualified

positions. All agreed it had helped first-time buyers and others, although there was

some concern it had allowed people to buy bigger homes sooner. Completions had

ramped up compared to previous schemes – particularly because of less restrictive

criteria and because more promotion was in place. It had brought stalled sites back

to the market and it had generated wider interest in other new build schemes as well.

It was estimated that typically between 1% and 10% drop out at the agent stage –

normally as a result of a change in circumstances. One agent had had 144

cancellations out of 800 applications in 2014, but this was clearly not the norm. In

this case it reflected developer activity to promote other properties and the use of

part-exchange to close the sale which is not permitted with Help to Buy. Overall

cancellations are low and much lower than “conventional” new build sales.

The 6 months constraint (maximum period allowed between exchange and

completion) was not seen as a problem by the agents. They saw it as a necessary

control mechanism and part of the monitoring process. One saw it as a benefit to

smaller developers. Unofficially some developers put through cases knowing they

would not meet the six-month rule and that the Homes and Communities Agency

would consider an extension. The agents were only paid on completion so there was

no incentive for agents to delay. On big sites delays were commonplace so

extensions (only after consideration by the Homes and Communications Agency)

were a practical solution.

In the London context the six month rule did make it hard for households to purchase

flats and there was at least one example of a developer holding back some units to

enable Help to Buy Equity Loan sales. It was suggested the Help to Buy Equity Loan

can only work at any scale in a small number of mainly outer boroughs, but it was

still seen as a particularly valuable tool to help those who could not otherwise have

stayed in London.

An agent commented it was rare to get six-figure salaries, most applicants bought

lower priced homes (£150-£250,000) and rarely at the highest prices. Moreover the

number of ‘outliers’ had declined over time. In London the prices were higher and the

properties were smaller; many were flats, leading to the problems of completion

noted above.

There was an appetite to involve social tenants in the scheme, but this was rare. It

was not Low Cost Home Ownership but a market scheme, and this was seen as its

great strength by some agents. It was a targeted economic stimulus programme and

that was what they thought it has done.

There was some disquiet that incomes up to £120,000 were involved – often above

in London – but it was more seen as filling a gap and the numbers were very small in

comparison to all Help to Buy Equity Loan sales. The scheme has not just attracted

first-time buyers, even though it was focussed on them. The scheme was generous

in that price could be up to £600k and with no income restriction. One agent noted

their average applicant income was £41,385.

The affordability checks were based on a standard format tested via the Homes and

Communities Agency calculator. As part of the affordability check agents also looked

forward to ensure the applicant could afford it in the future. It was very clear the

focus was on getting more new build. There was some concern about what might

happen in five years from taking out the Equity Loan although most felt that this

would be reasonably easily managed.

It was felt that this was a better scheme than New Buy. First Buy had an income limit

and the agent was more involved. Help to Buy Equity Loan included ‘second

steppers’, including Shared Ownership first-time buyers.

As it is a bigger scheme, there has been more momentum (agents pleaded – please

do not change the name again!). The fact that the scheme was market driven made

it more acceptable - Help to Buy Equity Loan had reduced the snobbery issue as this

was clearly a market product. One agent was clear there had been no negative

impact on Shared Ownership as it was a different, specifically affordable housing

product. Another was worried that perhaps Shared Ownership was suffering

because all the funds had gone into Help to Buy Equity Loan (which turned out to be

incorrect). Shared Ownership was seen as very different, particularly in that it does

not always require a mortgage. In Help to Buy Equity Loan a mortgage is needed.

Another agent commented that if buyers read what was sent they would be fully

informed – it was clear in the Help to Buy Equity Loan Guide and they had a

personal worked example. But most queried whether buyers actually read the

paperwork/loan document. This was seen as the Independent Financial

Advisor/solicitor’s responsibility, with both securing a signed undertaking regarding

borrower understanding.

The evidence suggests agents were concerned that it was the process dominating

rather than ensuring understanding. Even so the general perception was that almost

all buyers understood what they were signing up for at the time - but there was

concern as to whether this understanding would remain in place over time.

There was also concern about paying off the equity loan (which can only be done in

10% chunks or the whole loan). The website gives advice but agents were not sure

whether this was used; some buyers appear to have been distracted by it being a

government scheme and thus assuming there were no risks. One agent said it was

50/50 – some understood it all, others did not and it was simply a matter of

processing.

Conclusions: agents

One of the main benefits of the scheme is seen to have been the effective branding

at the national and local level and the range of media employed and the commitment

of developers to widely market the scheme. Other strengths have been its market

orientation, simplicity and the lack of restrictions - although it is recognised that this

has generated some waste. The main process concerns are around less

experienced solicitors and developers with few Help to Buy Equity Loan sales - and

whether all the bureaucracy was necessary. However the greatest concern is around

consumer understanding over time and whether there will be problems of perceived

mis-selling when people come to repay.

Most agents felt that the scheme was very positive. One agent felt that by 2020 the

scheme would have served its purpose. Others saw it as a scheme with continued

value.

4.4 Wider stakeholder perspective

We undertook interviews with five stakeholders with involvement in the Help to Buy

Equity Loan programme: Homes and Communities Agency, the Council of Mortgage

Lenders, Home Builders Federation, Federation of Master Builders and National

Housing Federation. We asked about the role they played and their level of

involvement; any issues they had had in getting their members on board; their views

of the scheme; and the case for extension and/or modification.

Scale of engagement

The trade bodies had varying levels of involvement in the scheme development:

• The Homes and Communities Agency was of course closely involved at an

operational level. The scheme has very open criteria.

• The Council of Mortgage Lenders was closely involved in developing the

scheme. They were particularly involved around the treatment of the equity

loan under the new Mortgage Market Review rules. Council of Mortgage

Lenders negotiated with the Financial Conduct Authority/ Prudential

Regulation Authority to secure treatment that allowed lenders to disregard in

affordability terms the repayment of the equity loan albeit that the interest

payable after 5 years is taken into account.

• The Home Builders Federation were not involved in the design of the

scheme although they input via their modelling of earlier schemes. Their

extensive role was in the practicalities. There had been monthly meetings on

earlier schemes and these were continued for Help to Buy Equity Loan.

These have now been reduced to quarterly as most issues are now clarified.

• The Federation of Master Builders was in a very different position and felt

that they had no involvement in the design or inception of the scheme. They

felt that the scheme was aimed at larger developers and little notice was

taken of the concerns of Small and Medium Enterprises.

• The National Housing Federation had little involvement although it had been

more directly involved in the First Buy and Homebuy Direct schemes.

The Council of Mortgage Lenders had found that members were keen to engage

with this scheme, at least in so far as they were involved in the New Build market.

For the National Housing Federation some members were involved as agents but

their main concern was around the possible impact on the shared ownership market

in which many members were engaged. However in reality these were two very

different markets and these concerns faded.

The Home Builders Federation had no trouble in involving their members, many of

whom had schemes of their own which they were keen to discontinue and had been

involved in earlier government schemes. Most of the problems were around specific

details. Members were pleased with the market orientation of the scheme and felt

that the government was trusting the private sector in a new and valuable way. They

also liked the fact that there were few restrictions and it was not limited to first-time

buyers.

The Federation of Master Builders on the other hand faced problems because many

members felt unclear about how much value the scheme would be for them. They

had less experience of earlier schemes and were concerned about details. Based in

part on past experience their view was that the set up costs relating to understanding

the scheme were too high for many Small and Medium Enterprise developers. All

welcomed the scheme but still found the scheme difficult to understand - in part

because many had had very few or indeed no sales under the scheme.

For the Homes and Communities Agency the challenge was the pace of the

introduction of Help to Buy Equity Loan. First Buy was stopped and the switch was

immediate.

Homes and Communities Agency had to move contracted First Buy builders to Help

to Buy Equity Loan and to encourage lenders to join the scheme. Weekly meetings

were held with the Council of Mortgage Lenders and lenders to get this process

completed as soon as possible.

With respect to the developers Homes and Communities Agency had a contractual

control via the sales process and the legal agreements associated with that via the

agents. The Homes and Communities Agency also mentioned that the Financial

Conduct Authority exchanged letters with the Council of Mortgage Lenders laying out

the parameters of the equity loan arrangements and specifically the main lender

responsibilities.

Strengths and weaknesses

From a Council of Mortgage Lenders perspective a clear strength of the scheme is

its engagement with the new build market and that it is getting more lenders into this

market (18 are now signed up). Some lenders have taken steps to control the flow of

business coming to them and the addition of new lenders into the market has been

helpful. They believe that the scheme is helping those with lower deposits and

increasing new build activity. The perceived weaknesses centre around whether

borrowers understand the scheme and not least the equity repayment. If new supply

does not increase then we could expect higher prices - this was seen as a direct

concern (which they felt the developers were exploiting) as well as the fact that it

would mean the equity loan repayments become more substantial. The benefits will

be in the longer term if increases in output are maintained.

The core concerns were how to get supply moving as quickly as possible and the

extent to which Help to Buy Equity Loan was helping those who could have

purchased without help. The Council of Mortgage Lenders also agreed that the

existence of a successful scheme might have reduced the need for innovation on the

part of lenders.

The Home Builders Federation saw the main strengths as the relative simplicity of

the scheme, the effective national marketing, the freedom builders have to market,

the lack of complicated rules and a reasonably effective processing mechanism. It

has helped speed up the process of rebuilding capacity and has helped to reduce

capital constraints - thus enabling expansion, more land purchase and more active

sites. The core strength is that it is market based. The main weakness is that

developers need ultimately to stand alone and not be dependent on government

support.

The Federation of Master Builders saw it as a scheme for larger developers helping

them to clear the backlog and get back on track even though many smaller

developers had signed up. They were concerned about the constraints on

expansion, land availability and the capacity to compete for that land; the planning

mechanism; and shortages of labour and materials. They did think it had helped the

market pick up and increased confidence but they felt that compared to the larger

developers the scheme had only helped Small and Medium sized developers to a

limited extent. It has helped planning for the future and the big requirement is for a

more certain environment. Agents have sometimes been frustrated by the sudden

upswings and downswings in activity especially in the early stages of the scheme.

The National Housing Federation saw the scheme as building confidence, not least

because of the scale of it. However there were concerns around targeting and

questions about whether it meant in practice some people are buying bigger/better

homes rather than just buying a first home. Shelter’s research on Fliers and Triers

was cited as evidence that the 20% contribution was not enough for many

households.

The Homes and Communities Agency noted that demand was strong, that the

mechanisms in place work and that they had managed to involve both small and

large developers. Indications were that scheme strength was growing. The Homes

and Communities Agency was managing out the Equity Loan portfolio and had

learned from the Home Buy Direct scheme, but there were concerns about what

people might remember after five years (particularly if their circumstances change).

In terms of the scheme’s contribution Council of Mortgage Lenders agreed the

scheme had helped deal with the backlog of unsold new homes and with improving

market sentiment but was less clear about its impact in increasing output. Home

Builders Federation was sure that it was speeding up development, enabling land

assembly and generating higher levels of output because of higher demand and

lower risks. The Federation of Master Builders also saw some improvement, mainly

as an outcome of greater confidence. The National Housing Federation asked

whether any increase was proportionate to the investment made? The Homes and

Communities Agency noted an increase in sites opening up (from feedback offered

by developers) along with the evidence on scheme numbers.

Both of the house builder trade bodies felt that the scheme has bedded down and

that the stability of the scheme has been of great value. Council of Mortgage

Lenders felt the mood music had changed and had become more positive while

National Housing Federation asked what impact had there been on prices? The

Homes and Communities Agency felt the Help to Buy Agent arrangements had gone

well with the transition from 11 or 12 to seven organisations who were now in the first

year of an initial two-year contract.

The case for extension and modification

The Council of Mortgage Lenders felt the extension would be good for business and

noted there would be a hiatus if it were stopped. They and others noted the negative

impacts when the most important lender changed their rules and when the

equivalent scheme in Scotland temporarily ran out of money.

The Home Builders Federation noted that some builders generated large proportions

of their sales from Help to Buy Equity Loan and thought that this presented a major

challenge in ‘tapering down’ the initiative. They noted the Scottish experience and

were concerned about there being enough flexibility to move allocations forward.

They did not however want it to go on forever as the industry should stand on its own

feet. It was challenging from a Homes and Communities Agency programme

management perspective.

The Federation of Master Builders also wanted the scheme to continue. Both bodies

however noted that there was a case for a market based shared equity scheme to

become part of the mainstream.

The National Housing Federation felt continuation could be justified if there was clear

evidence regarding increased output – although Help to Buy equity loans were not

defined as affordable housing in official statistics. The National Housing Federation

also asked about the role of Shared Ownership.

Most stakeholders felt that one of the big benefits of the scheme is that it is relatively

simple and stable. They were not pushing for change. Most would be reasonably

happy to reduce the maximum value or to set regionalised maxima (London or

London/South East versus the rest of the country). The specifics of the six-month

constraint (maximum time from exchange to legal completion) were seen as difficult

only in the context of London flats – but here it did generate limitations. Some

wanted to focus on first-time buyers and defined income thresholds. The developers

were totally against such restrictions, while the Homes and Communities Agency

noted the mixed views that existed. The Council of Mortgage Lenders reminded us

why the scheme exists – to get the market moving.

Conclusions

The stakeholders inherently reflected their own constituencies and the extent to

which the Help to buy Equity Loan scheme had impacted on their activities. Most

were positive – although it is worth noting the very different views of those speaking

for smaller as compared to larger developers.

All of the stakeholders saw the scheme as a considerable improvement on earlier

schemes – in particular because it was simpler and more market oriented. Some

were concerned about negative impacts on prices and other products, and about

how and when the policy should be phased out. Most were also concerned about

consumer understanding going forward.

Chapter 5: Demand-side perspectives

5.1 Introduction

This chapter presents evidence collected from the representative telephone interview

survey

with households that have bought with the assistance of Help to Buy Equity

Loan (from April 2013 to January 2015) to consider consumer perspectives in

relation to awareness of the policy as well as the potential impacts on access to the

homeowner market, changes to living circumstances and future housing careers. It

also assesses the perceived experiences of purchasing with the assistance of Help

to Buy Equity Loan (addressing a key objective of the study).

It is important to note that data presented in this chapter is based on those who have

been through the entire purchase process using Help to Buy Equity Loan assistance.

It does not include those who may have been interested or started but did not

complete the purchase with assistance. This group was outside the scope of the

survey and may hold different perspectives to those presented in this chapter.

Analysis of sub-groups presented in this Chapter is based on information collected in

the survey about the respondent during the interview, or further information held by

the Homes and Communities Agency that the respondent has provided consent to

match to their responses. Where spatial differences are commented on, these are

based on the Homes and Communities Agency Operating Areas provided with the

sample.

A key consideration for the design of the survey was to build in the capability for

respondents to recall experiences that, for many (more than half the sample), would

have occurred more than a year ago. To minimise any recollection difficulties around

the purchase process, the questionnaire was carefully designed to follow a

sequential progression (from pre-move, through their experiences to rating of the

property purchased). To further assist, where appropriate questions explicitly

referred to the relevant address of the Help to Buy Equity Loan property purchased,

ensuring that questions were clearly framed to assist cognitive recall when

responding.

Further details of the survey approach can be found in Appendix 1 of this report, and the telephone survey questionnaire can

be found in Appendix 2.2

5.2 Who is using Help to Buy Equity Loan?

Those using Help to Buy Equity Loan are typically young, first-time buyers who either

previously lived with their parents or rented (largely from a private landlord). More

than three in five (62%) of those using Help to Buy Equity Loan are under the age of

35 compared to nine per cent who are aged 45 and above. Furthermore, around a

fifth of this population are either single person households or live in households with

four or more people, while two in five live in two person households.

A majority (95%) bought property with assistance outside of London and the average

(mean) gross household income at the time of the Help to Buy Equity Loan purchase

was £47,050

(and the median income was £41,323).

To place income levels of those using Help to Buy Equity Loan into wider, national,

context it is possible to compare with a number of other existing data sources. It is

important to recognise that the survey estimates are based on a very specific group

of the owner-occupied population (those with a mortgage and who are predominantly

first-time buyers) and use total income assessed for mortgage purposes at the time

of purchasing their Help to Buy Equity Loan property. As such we draw on existing

sources that provide the best basis for making like-for-like comparisons, although

even here differences in approaches, definitions and timeframes mean comparisons

should be treated with the necessary caution.

The most recently available data from the English Housing Survey (2013-14)

indicates that the average (mean) gross household income of all owner-occupiers

with a mortgage was £51,688

and compares to an average of £47,050 among

those purchasing using Help to Buy Equity Loan. This suggests that those accessing

the homeowner market using Help to Buy Equity Loan have significantly lower

income levels than the population of owner-occupiers with a mortgage in England at

large. However, it is important to recognise that the majority of those using Help to

Buy Equity Loan are first-time buyers and as such would be expected to

demonstrate lower income levels.

Comparisons of the income levels of first-time buyers specifically against national

estimates are commented on further below. Figure 5.1 summarises some of the key

characteristics of those buying a property using Help to Buy Equity Loan.

Estimates based on administrative data (held by the Homes and Communities Agency) collected as part of the

Help to Buy Equity Loan application process where participants have given permission for this information to be

matched.

Based on household reference person and partner at £994 per week - See

https://www.gov.uk/government/statistical-data-sets/tenure-trends-and-cross-tenure-analysis

Figure 5.1 – Characteristics of those using Help to Buy Equity Loan

Version 1 | Internal Use Only)© Ipsos MORI

First-time buyer

Homes &

Communities Agency

Operating Areas

Income at Help to Buy

Equity Loan purchase

Previous tenure

14%

23%

24%

32%

20%

30%

26%

19%

53%

24%

28%

62%

18%

82%

£55,000+

£40-£54,999

£25-£39,999

Less than £25,000

South & South West

North

Midlands

London

East & South East

Other/ DK

Owned (with/ without mortgage)

Renting (private & social)

Living with parents

60+

45-59

35-44

16-34

Non first-time buyer

First-time buyer

Age

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

Average income: £46,814

More than eight in ten respondents (82%) were first-time buyers when they

purchased their Help to Buy Equity Loan property. This group are more likely than

non-first-time buyers to be younger (68% are under the age of 35 compared to 38%

of non first-time buyers), live in smaller households (62% live in single or two person

households compared to 38% of all non first-time buyers), have previously been

living with parents (28% vs 8%) or renting from a private landlord (58% vs 13%), and

have lower average gross household incomes (£44,395 at the time of the Help to

Buy Equity Loan purchased compared to £57,959 for non first-time buyers).

Data available from the most recently available English Housing Survey (2013-14 so

not directly comparable) indicates that the average gross household income of

owner-occupiers with a mortgage in England who were first-time buyers (and

resident for less than 5 years) was £47,528

, significantly higher than first-time

buyers who have used Help to Buy Equity Loan.

However a comparison of first-time buyer income data from the Council of Mortgage

Lenders

indicates no significant difference between the median income of first-time

buyers purchasing property in England between Quarter 2 2013 and Quarter 1 2015

(broadly equivalent to the period covered by the current survey sample), estimated

Based on household reference person and partner at £914 per week - See

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/445547/Chapter_3_Owner_occupi

ers.pdf

See https://www.cml.org.uk/industry-data/ Note this will also include those who have purchased using Help to

Buy Equity Loan

at £38,019, and all first-time buyers across the sample at £39,834

Further analysis indicates that eight in ten (80%) of those who purchased properties

for less than £250,000 were first-time buyers, compared with 46% of those who

bought properties for more than £400,000. As first-time buyers are more likely to

have purchased lower value properties, they are also more likely to have smaller

equity loan amounts – the average Equity Loan amount for first-time buyers is

£39,907 compared to £52,833 for non first-time buyers. Table 5.1 below summarises

the profile of first-time and non first-time buyers in relation to key characteristics.

Table 5.1 – Profile of first-time and non first-time buyers

Help to Buy Equity

Loan first-

time

buyer profile

Help to Buy Equity

Loan non first-time

buyer profile

Age

16-34

68%

38%

35-44

23%

47%

45+

14%

Previous tenure

Living with parents

28%

Renting (private and social)

62%

13%

Owned (with and without mortgage)

76%

Other/ DK

Household size

Single person

20%

Two persons

42%

32%

Three or more persons

38%

61%

Income and Equity Loan amount

Average income at purchase

£44,395

£57,959

Average Equity Loan amount

£39,907

£52,833

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

Although not statistically significantly different, there are a number of reasons that may help to explain a higher

first-time buyer income estimate from the Help to Buy Equity Loan sample. The Council of Mortgage Lenders

estimate is based on a crude average of quarterly median income estimates to cover the policy from which the

Help to Buy Equity Loan sample covers. As such it gives equal weight to estimated income at the start of the

period (Q2 2013) as at the end (Q1 2015). In contrast, nearly half of the Help to Buy Equity Loan sample

completed within the last year, and less than a quarter completed 18 months + ago and as such the median

estimate is based on more recent buyers who are more likely to have higher income levels. Further, Council of

Mortgage Lenders data cover all loan to value purchases, and as such will include some lower income, higher

loan to value borrowers, whereas the Help to Buy Equity Loan sample will be 80% loan to value and thus include

a higher proportion of higher income borrowers.

5.3 Has Help to Buy Equity Loan encouraged home

ownership?

A key ambition of the policy is to make access to the homeowner market easier and

encourage owner occupation. Drawing on the survey data this section considers

whether there is any evidence of a shift in tenure preferences towards owner

occupation, whether it has enabled faster access to and progression through the

homeowner market. It also considers the wider views and perceptions of the Help to

Buy Equity Loan process from the perspective of those who have been assisted by

the policy.

Tenure preferences

There is limited evidence that the policy has resulted in a significant shift towards

owner-occupation with the overwhelming majority of those purchasing using Help to

Buy Equity Loan initially looking to buy a property. As Figure 5.2 below indicates,

some 95% of respondents say that they were looking to buy when they first started

to look to move whereas four per cent say they were looking to rent a property.

Figure 5.2 – Tenure preferences when first starting to look to move

Version 1 | Internal Use Only)© Ipsos MORI

Q When

you first started to look to move, were you looking to buy or rent a property?

95%

Buy

With mort. (95%)

Without (*%)

Rent

PRS – 4%

LA/HA - *%

Don’t know (1%)

16%

12%

Equity Loan amount

<£25k

Income (<£25k)

Living at home with

parents

Single person hh

North

First-time buyer

% looking to Rent

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

The data does however suggest that the policy has had more impact in shifting

tenure preferences among particular groups of the population. First-time buyers and

those living in single person households are more likely than non first-time buyers

and those living in larger households to have originally been looking to rent (five and

nine per cent respectively).

Further, and likely reflecting Help to Buy Equity Loan disproportionately assisting

more first-time buyer and single person households into owner-occupation, those

with the lowest levels of household income at the time of the Help to Buy Equity

Loan purchase (less than £25,000) and those with the smallest Equity Loan amounts

(less than £25,000) are more likely than the population overall to have originally

been looking to rent (12% and 16% respectively).

Access to the home owner market

One potential consequence of the policy is that it has enabled those looking to

access the home ownership market to do so more quickly than otherwise would have

been possible. The survey considered this in further detail by capturing the length of

time respondents had been looking before moving into the property they bought with

the assistance of Help to Buy Equity Loan, as well as a number of perception based

questions around when they started their search and the speed of the buying

process.

On average respondents spent 9.4 months looking for a property before moving into

the property they bought with the assistance of Help to Buy Equity Loan. As Figure

5.3 below indicates, nearly three quarters (74%) of respondents first started looking

less than 12 months before they moved in, with two in five (38%) first starting to look

less than six months before. Around one in eight respondents reported that they first

started to look 18 months or more before moving the property they bought with

assistance.

Figure 5.3 – Length of time between starting to search and moving into the

property purchased using Help to Buy Equity Loan

Version 1 | Internal Use Only)© Ipsos MORI

Q When did you first start looking to move? By looking I mean searching and viewing properties.

38%

36%

13%

<6 months

6-11 months

12-17 months

18+ months

Base: 471 purchasing property using Help to Buy Equity Loan, May/ June 2015

There is little variability in time spent looking for property before moving by sub-

groups of the population, although those living in larger household sizes and those

living in London tended to spend longer, on average, looking before moving into the

property they bought with assistance.

Respondents were also asked a number of perception based questions around

access to the market, results from which are summarised in Figure 5.4 below. By a

margin of two to one, respondents were more likely to agree (61%) than disagree

(31%) that using Help to Buy Equity Loan had meant they started to look for property

to buy sooner than they otherwise would have. Respondents were also less likely to

agree (36%) than disagree (47%) that the time taken to buy the property was slower

than it would have been without the assistance of Help to Buy Equity Loan.

Figure 5.4 – Perceptions of speed of access to the homeowner market

Version 1 | Internal Use Only)© Ipsos MORI

39%

21%

22%

15%

11%

15%

22%

16%

25%

Strongly agree Tend to agree Neither/ nor

Tend to disagree

Strongly disagree

Don't know

I started looking for property

to buy sooner than I

otherwise would have

Q To what extent do you agree or disagree with the following statements about buying a property

using the Help to Buy Equity Loan scheme.

The time taken to buy the

property was slower than it

would have been without

this assistance

61%

31%

36%

47%

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

Further analysis suggests that in particular it is younger buyers (under 25) and those

with the lowest available deposit amounts at the time of purchase who have been

able to access the homeownership market quicker as a result of the policy. As Table

5.2 below shows, those aged under 25 and those with the lowest deposit amounts

were nearly four times as likely to agree as disagree that using Help to Buy Equity

Loan meant they started looking for a property to buy sooner.

Among those that agree that using Help to Buy Equity Loan had meant they started

to look for property to buy sooner than they otherwise would have, the average time

spent looking to move was 8.8 months, compared to an average of 10.7 months

among those who disagree.

Table 5.2 – Variations in response to ‘I started looking for a property to buy

sooner than I otherwise would have’

Agree

Disagree

Ratio of

agree to

disagree

Overall (501)

61%

31% 1.9 : 1

Age

16-24

75%

20% 3.8 : 1

25-44

61%

31%

2.0 : 1

45-59

48%

40% 1.2 : 1

First-time buyer

Yes

64%

29% 2.2 : 1

48%

39%

1.2 : 1

Previous tenure

Living at home with parents

70%

26%

2.7 : 1

Rented (Social or Private)

62%

30% 2.1 : 1

Owned (with or without mortgage)

48%

39%

1.2 : 1

Help to Buy Equity Loan deposit

amount

<£9,000

73%

19% 3.8 : 1

£9,000-£14,999

62%

28% 2.2 : 1

£15,000-£39,999

52%

38% 1.4 : 1

£40,000+

28%

69% 0.4 : 1

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

There are few significant differences between perceptions of the impact of Help to

Buy Equity Loan on the speed of the property buying process although further

analysis indicates that those living in households with children are significantly more

likely than the sample population overall to agree that the property buying process

was slower than it would have been without assistance.

Saving for a deposit

It is increasingly recognised by the sector and the public alike, that raising a deposit

is one of the key barriers to entry to the homeownership market

. By reducing the

time needed to save for a sufficient deposit Help to Buy Equity Loan can potentially

help to speed up entry to the homeowner market. The survey provided an

opportunity to consider the impact of Help to Buy Equity Loan on saving for a deposit

which is considered further below.

Time spent saving for a deposit

Figure 5.5 below shows that around a quarter (26%) of respondents say that up to

the point when they first started to look to move, they had been saving for a deposit

for three years or more whereas around a third (34%) say they had been saving for

less than a year.

Figure 5.5 – Variations in length of time spent saving for a deposit

Version 1 | Internal Use Only)© Ipsos MORI

34%

32%

46%

28%

20%

39%

38%

32%

37%

27%

50%

31%

34%

18%

35%

29%

31%

27%

31%

32%

35%

15%

26%

25%

28%

43%

21%

24%

30%

23%

31%

21%

11%

10%

13%

Less than a year 1-3 years 3+ years Don't know/ refused

Overall

First

-time buyer

Non First -time buyer

East & South East

London

Midlands

North

South & South West

Living at home with parents

Rented

Owned

Q Up to the point when you first started to look to move, how long had you (your partner) been

saving for a deposit?

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

Non first-time buyers are significantly more likely than first-time buyers to have been

saving for a deposit for less than a year (46% compared to 32%), as too are those

previously living in owner-occupied property when compared to those previously

living in rented accommodation (50% compared to 27%).

The latest data from the Halifax/ Ipsos MORI Housing Market Confidence Tracker indicate that 55% of the

British public identify raising a deposit as the main barrier to being able to buy a property (Quarter 2 2015). See

https://www.ipsos-mori.com/researchpublications/researcharchive/3167/Halifax-Housing-Market-Confidence-

Tracker.aspx

Those previously living in owner-occupied accommodation are characterised by

having higher incomes and in many cases significant deposits from the sale of the

previous property and so the role of Help to Buy Equity Loan in helping to speed up

entry to the homeowner market is less evident among this group.

However, results also suggest that more than a third (37%) of those previously living

at home with parents had been saving for a deposit for less than a year before

starting to look. These households are predominantly young, first-time buyers with

relatively lower incomes who are more likely to be restricted from the homeowner

market by a lack of savings for a deposit.

There is also some evidence of spatial variability with those living in the Homes and

Communities Agency Operating Areas of the Midlands and the North significantly

more likely than those living in the East & South East and London to have been

saving for less than a year. This may suggest that Help to Buy Equity Loan is having

more of an effect in the less pressurised markets outside London and the South East

in assisting the speed of entry into the homeowner market.

Savings amount

Respondents were also asked about the total amount of savings they had when they

first started to look to move and, for those agreeing to have data matched in,

information about the amount of deposit used at the time of the Help to Buy Equity

Loan purchase (provided by Help to Buy Agents).

Table 5.3 below summarises results and indicates that the average amount of

savings available for a deposit when respondents first started to look to move was

£15,283

. At the time of purchase, the average amount of deposit used was

£17,019. The respective median amounts of savings available for a deposit were

£10,000 and £11,750.

The median amount of savings available for a deposit for first-time buyer

respondents when they first started to look to move was £10,000 and rising to

£11,000 at the time of purchase. In the latest English Housing Survey for 2013-14,

the median deposit paid by recent first-time buyers in England (defined as those who

had bought for the first time within the last three years) was £17,745

. This suggests

that Help to Buy Equity Loan is relieving some of the pressure on deposit amounts,

enabling access to the market with lower than average deposit amounts.

Average is indicative only as 68% of respondents providing a response estimated the amount of savings they

had at the time they first started to look

See

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/445547/Chapter_3_Owner_occupi

ers.pdf

As has been noted earlier, the average time between first starting to look and moving

into property bought with the assistance of Help to Buy Equity Loan is 9.4 months.

Whilst this can be treated as indicative only, this suggests that households using the

scheme are making relatively modest increases in deposit amounts while searching

for a property and as data in the table below indicates, this is more pronounced for

first-time buyers.

Table 5.3 – Variations in available deposit amounts by first-time buyer status

(a) Ave

savings when

first started

to look (447)

(b) Ave

Deposit at

time of Help

to Buy Equity

Loan

purc

hase

(426)

Difference

(b)-(a)

Overall

£15,283

£17,019

£1,736

First-time buyer

Yes

£14,765

£15,117

£352

£17,855

£24,833

£6,987

Base: 447 purchasing property using Help to Buy Equity Loan, May/ June 2015

Sources of finance for a deposit

With more stringent deposit requirements, use of ‘informal’ sources of finance (such

as a family loan for example) to contribute towards a deposit has become an

increasingly prominent approach to gain access to the homeowner market

Respondents were asked whether they had used any other sources of finance, such

as a loan or ‘gift’ from the family to help contribute to the deposit paid when they

bought their property with the assistance of Help to Buy Equity Loan. Results are

summarised in Table 5.4 below and indicate that a third (34%) say they did use other

sources of finance, such as a loan or ‘gift’ from the family, for the deposit, while a

majority (64%) say they did not.

Those more likely to have used additional sources of finance include those living in

single person household (47%), while non first-time buyers and those previously

living in owner-occupied property are less likely to have used additional sources.

According to the latest English Housing Survey household report, first-time buyers who have been living in

their property for less than 5 years, the proportion who financed the purchase of their home with the help from a

gift or loan from family or friends increased from 20% to 27% between 2003-04 and 2013-14. See

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/445547/Chapter_3_Owner_occupi

ers.pdf

Table 5.4 – Variations in use of other sources of finance for a deposit

Yes

Don’t

know

TOTAL

Overall

34%

64%

100%

First-time buyer

Yes

37%

59%

100%

16%

83% 1% 100%

Previous tenure

Living at home with parents

39%

55% 5% 100%

Rented (Social or Private)

37%

60%

100%

Owned (with or without

mortgage)

16%

82% 2% 100%

Household size

Single person

47%

47% 6% 100%

Two persons

34%

64% 2% 100%

Three persons

25%

73% 2% 100%

Four or more persons

28%

68% 3% 100%

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

The analysis of savings information suggests that the majority of those using Help to

Buy Equity Loan took less than three years to save for a deposit, did not add

significantly to their deposit amount in between the time when they first started to

look for a property and moving in and, in the main, were not reliant on other sources

of finance to contribute towards their deposit (although were more likely to than first-

time buyers across England).

5.4 Has Help to Buy Equity Loan impacted on ‘housing

careers’?

A key question considered in more detail in the following chapter is the extent to

which Help to Buy Equity Loan has enabled a purchase to take place that otherwise

would not have been able to. Respondents were asked a number of questions

relating to their capability to be able to afford to purchase property without the

assistance of Help to Buy Equity Loan. It is important to recognise that the analysis

of these perception-based questions assumes that respondents are answering from

a position of knowledge about the housing market, the mortgage market and their

own personal finances.

When respondents were asked about their ability to purchase the same type of new

build property or similar property in the existing (second-hand) market without the

assistance of Help to Buy Equity Loan, a majority in both cases stated that they

would not. Figure 5.6 below indicates that less than one in five respondents (17%)

stated that they would definitely or probably be able to purchase the same new-build

property without assistance compared to 82% who say they would not. A majority

also state that they would not be able to purchase a similar property in the existing

market although here the difference between those that would and would not is

reduced – 63% say they wouldn’t be able to, while 35% say they would.

There is little variation in responses across the sub-groups of the population

although those with the highest deposit amounts for the purchase of their Help to

Buy Equity Loan property (£40,000+) and those receiving the lowest Equity Loan

amounts (less than £25,000) are significantly more likely than the population overall

to say they would be able to buy the same property without assistance (32% and

33% respectively compared to 17% overall).

Figure 5.6 – Ability to buy property without Help to Buy Equity Loan

assistance

Version 1 | Internal Use Only)© Ipsos MORI

11%

26%

28%

31%

54%

32% 2%

Yes - definitely Yes - probably No - probably not

No - definitely not Don't know

… do you think you would have been

able to buy this same property

without the assistance of the Help to

Buy Equity Loan scheme or not?

Q At the time that you moved into <<HtB ADDRESS>>…

..and do you think you would have

been able to buy a similar property

that was NOT new build and being

sold by its owner. By similar I

mean in terms of type, size and

location?

17% 82%

35% 63%

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

Respondents were also asked the extent to which they agreed that they would have

been able to buy a ‘property they wanted’ and specifically ‘newly built’ property

without the assistance of Help to Buy Equity Loan. By a margin of two to one, more

respondents disagreed than agreed that they would be able to buy a property they

wanted without assistance (65% disagreed compared to 29% who agreed). Fewer

respondents (58%) disagreed that they would still have bought a newly-built property

without assistance compared to a third who said they agreed.

Again it is those with the highest amount of deposit available when purchasing their

Help to Buy Equity Loan property (£40,000 or more) who are significantly more likely

than the population overall to agree that they would have been able to buy without

assistance.

Progression up the property ladder

One of the potential impacts of the policy highlighted from the supply-side interviews

was to enable those buying with the assistance of Help to Buy Equity Loan to

progress more quickly up the housing ladder. As shown in Figure 5.7 below, survey

results suggest some evidence of this with around three in five respondents agreeing

that the Help to Buy Equity Loan scheme had enabled them to buy a larger property

(61%) or to buy a property in a better area (60%). In contrast, less than one in three

say that the Help to Buy Equity Loan did not enable them to purchase a house with a

larger number of bedrooms (30%) or in a better area (27%).

Figure 5.7 – The role of Help to Buy Equity Loan and progression up the

property ladder

Version 1 | Internal Use Only)© Ipsos MORI

37%

33%

24%

26%

13%

18%

17%

12%

10%

Strongly agree Tend to agree Neither/ nor

Tend to disagree Strongly disagree Don't know

It enabled me to buy a

property with a larger number

of bedrooms than would have

been possible without this

assistance

Q To what extent do you agree or disagree with the following statements about buying a property

using the Help to Buy Equity Loan scheme.

It enabled me to buy a

property in a better area

than would have been

possible without this

assistance

61%

30%

60%

27%

Base: 501 purchasing property using HtB EL, May/ June 2015

Further analysis, summarised in Figure 5.8 below, does however suggest some

variability among sub-groups. In particular, those living in the Homes and

Communities Agency Operating Area of South & South-West are most likely to say

that Help to Buy Equity Loan has enabled them to buy a property with a larger

number of bedrooms (78%) and to purchase a property in a better area (74%).

Further, those living in smaller, two-person households (71%), are more likely than

the population overall to say that Help to Buy Equity Loan has enabled them to buy a

property with a larger number of bedrooms while non first-time buyers are more likely

to say it has enabled them to purchase a property in a better area (72%).

Figure 5.8 – Variations in progression up the property ladder

Version 1 | Internal Use Only)© Ipsos MORI

Q To what extent do you agree or disagree with the following statements about buying a property

using the Help to Buy Equity Loan scheme - It enabled me to buy a property with a larger number of

bedrooms than would have been possible without this assistance

53%

45%

60%

58%

78%

55%

71%

55%

71%

East & South East

London

Midlands

North

South & South West

Single person hh

Two person hh

Three or more person hh

Children in hh

No children in hh

% Agree

Base: 501 purchasing property using HtB EL, May/ June 2015

Respondents were also asked to indicate the extent to which they agree or disagree

that they felt unable to move up the property ladder now and results are summarised

in Figure 5.9 below. Despite the relative recency of the Help to Buy Equity Loan

policy, half of respondents disagreed that they felt unable to move up at the time of

the interview, while more than one in three (36%) agreed.

Further analysis suggests that it is those who have accessed at the lower end of the

market who are most likely to feel unable to move up the property ladder. This

includes those purchasing smaller and flat type property as well as those on lower

incomes (below £25,000 in gross annual household income) as indicated in the

figure below.

Figure 5.9 – Perception of impact of Help to Buy Equity Loan on moving up the

property ladder

Version 1 | Internal Use Only)

36%

10%

50%

Don’t know

Agree

Neither/

nor

Disagree

43%

42%

40%

41%

Flat

Help to Buy Equity Loan

purchase price (<£250k)

Income (<£25k)

1/ 2 bed property

North

% Agree

Q To what extent do you agree or disagree with the following statements about buying a property

using the Help to Buy Equity Loan scheme - I feel I am unable to move up the property ladder now

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

Future moving intentions

The survey indicates that only a very small proportion of respondents had

subsequently moved to different property at the time of interview (just two out of a

sample of 501), while a majority (66%) say they do not intend to move within the next

five years. This is to be expected given the recency with which the policy was

introduced and when most moves have taken place.

As indicated in Table 5.5 below, moving intentions do however vary markedly across

sub-groups with first-time buyers significantly more likely than non first-time buyers

to say they intend to move within the next two to five years (31% compared to 14%).

There are also some spatial variations. For example those in the Homes and

Communities Agency Operating Area of the East & South East / London, as well as

those in the South & South-West are more likely to say they are intending to move in

the next two to five years, than those in the North (30% and 38% vs. 19%).

Those living in smaller households and smaller property sizes are also significantly

more likely to say they intend to move within the next five years than those living in

larger households or properties.

Table 5.5 – Which of the following statements best describes your current

attitude to moving to different property in the future?

I intend

to move

within the

next year

I intend

to move

within the

next 2 to

5 years

I do not

intend to

move

within the

next 5

years

Don’t

know

TOTAL

Overall

28%

66%

100%

First-time buyer

Yes

31%

62%

100%

5% 14% 82% 0% 100%

Homes &

Communities

Operating Areas

East & South East

27%

63%

100%

London

3% 44% 50% 4% 100%

Midlands

29%

66%

100%

North

2% 19% 76% 3% 100%

South & South West

38%

56%

100%

Property size

1/ 2bed

43%

46%

100%

3 beds

2% 27% 68% 3% 100%

4+ beds

15%

81%

100%

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

As indicated in Figure 5.10 below, around three in ten (31%) say they intend to move

within the next five years. Of those who say they do intend to move, the most

common reasons given are to move to a larger property (54%), to move to a different

type of property (15%) or for job related reasons (14%). Very few (4%) say they are

intending to move because they can’t afford the mortgage payments.

For the majority (73%) of those who say they are not intending to move, the main

reason given is that their current property suits their needs. A quarter like the area

that they currently live in and one in twelve cite job related reasons such as proximity

to work place.

Only a small proportion of respondents cite financial reasons as a reason for not

intending to move and very few (3%) spontaneously mention repayment of the

Equity Loan in a rising market as a reason for not moving.

Figure 5.10 – Intention to move and reasons

Version 1 | Internal Use Only)© Ipsos MORI

54%

15%

14%

13%

To move to larger property

To move to different type of

property

Job related reasons

To move to a better area

Can't afford mortgage payment

Q Which of the following statements best describes your current attitude to moving to different

property in the future?

% Top five most commonly mentioned

3% 28% 66% 3%

I intend to move within the next year

I intend to move within the next 2 to 5years

I do not intend to move within the next 5years

Don’t know

Q Why do you intend to move? Q Why do you not intend to move?

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

73%

25%

Current property suits needs

Like area currently live in

Job related reasons

School related reasons

Can't afford suitable property in

area want to live in

% Top five most commonly mentioned

Impacts on living circumstances

Respondents were also asked to indicate whether the purchase of a property using

Help to Buy Equity Loan had improved or made worse their living circumstances, or

whether it made no difference and results are summarised in Figure 5.11 below.

Almost three quarters of respondents agree that the quality of the property (72%)

and the space they have within the property (73%) was better in the property they

purchased with the assistance of Help to Buy Equity Loan compared to the property

they lived in immediately before this.

Just over half agree that the location of the property was better (53%), whereas

around three in ten said it made no difference.

Figure 5.11 – Impacts of Help to Buy Equity Loan on living circumstances

Version 1 | Internal Use Only)© Ipsos MORI

73%

72%

53%

13%

18%

31%

13%

15%

Better No difference Worse Don't know None

The space you have within the

property

Q Now thinking about the property you bought with the assistance of the Help to Buy Equity

Loan scheme and how it compared to the property you lived in immediately before this, how

much better or worse do you think <<HtB ADDRESS>> is/ was in relation to the following, or is/

was there no difference?.

The location of the property

The quality of the property

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

Table 5.6 below summarises variations in these property ratings by a range of sub-

groups. Those living in larger (three or more person) households are significantly

more likely than those living in smaller households to agree that the quality of the

property is better (87% of three person households said this compared to 55% of

single person households). Those households with children are also significantly

more likely to say the quality of the property is better (82% compared to 69% of

those living in households with no children).

Ratings of the quality of the property also vary by previous tenure. Those previously

living at home with parents are significantly less likely than the sample population

overall to say the quality of the property is better, whereas those previously renting

(especially from a private landlord) are significantly more likely to say the quality of

the property has got better.

Those with higher incomes and larger Help to Buy Equity Loan deposits are also

more likely to say the quality of the property is better than those on lower incomes or

with smaller deposit amounts.

This is a similar case for those who believe that the space they have within the

property is better. Those with higher incomes are more likely than those on lower

incomes to say the space within the property has improved. Those with higher

incomes are also more likely to consider they have moved to a better location (61%

of those with income of £55,000+ compared with 53% overall). An improvement in

the location of the property is also more likely for those households with children

(66% vs. 45%).

In contrast first-time buyers and those who have previously been living at home are

less likely than the population overall to say they moved to a better location (48%

and 33% respectively compared to 53% overall). In addition, those who are in the

Homes and Communities Agency Operating Area of the East & South East (22%)

are more likely than those in the Midlands (10%) and South & South West (9%) to

say they have moved to a worse location.

Table 5.6 – Variations in relation to quality, space and location of property

The quality of

the property

% better

The space

you have

within the

property

% better

The location

of the

property

% better

Overall

72% 73% 53%

First-time buyer

Yes

70%

48%

81% 86% 71%

Homes & Communities Agency

Operating Areas

East & South East

65% 74% 46%

London

78% 70% 46%

Midlands

80% 78% 57%

North

70% 70% 55%

South & South West

71% 70% 50%

Previous tenure

Living at home with parents

48% 50% 33%

Rented (Social or Private)

81% 80% 55%

Owned (with or without mortgage)

77% 83% 68%

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

5.5 Perceptions of the Help to Buy Equity Loan process

The survey also provided the opportunity to capture perception based data to

provide evidence on the perceived experiences of the Help to Buy Equity Loan

scheme from the consumer perspective - one of the key objectives of the study. This

section considers these experiences in further detail and considers awareness

levels, sources of information and contact, the understanding of the financial

commitment and their overall satisfaction with the process.

It is important to reiterate that data presented in this section is based on those who

have been through the process and successfully purchased using Help to Buy Equity

Loan. It does not consider the views of those who may have started but not

completed the transaction and who may share different perceptions and

experiences. This group were beyond the scope of this study.

Awareness of Help to Buy Equity Loan

As shown in Figure 5.12 below, nearly three in five respondents (58%) said that they

were aware of the Help to Buy Equity Loan scheme when they first started to look to

move while around two in five indicated they were not (41%).

Figure 5.12 – Awareness of Help to Buy Equity Loan when first started to look

to move

Version 1 | Internal Use Only)© Ipsos MORI

73%

60%

55%

52%

65%

60%

53%

54%

London

Midlands

North

East & South East

South & South West

1 person

2 persons

3 persons

4+ persons

58%

41%

Yes

Don’t know

% Yes

Q And when you first started to look to move, were you aware of the Help to Buy Equity Loan

scheme or not?

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

There are no significant variations in awareness by age of respondent nor between

first-time and non first-time buyers although awareness levels are higher among

single person households (65% say they were aware compared to 54% of those with

4 or more people in the household) as well as by broad region.

In particular awareness of Help to Buy Equity Loan is significantly higher among

those living in the Homes and Communities Agency Operating Area of London (73%)

than those living in the South & South West – which in part at least may be explained

by the household size profile of purchasers in these locations. The Operating Area of

London has the highest proportion of single person households who have purchased

using Help to Buy Equity Loan (32%), whereas the Operating Area of the South &

South West has the lowest (14%).

Awareness levels also vary by date of completion, with those most recently

completing on their Help to Buy Equity Loan property most likely to be aware of the

policy when they first started to look to move. Of those completing within the last 6

months, more than two-thirds (68%) say they were aware of the policy, compared to

43% who completed on their Help to Buy Equity Loan property 18 months or more

ago.

Sources of information about Help to Buy Equity Loan

Table 5.7 below summarises the main sources of information about Help to Buy

Equity Loan. For nearly half (49%) of all respondents house builders were identified

as the main source of information, likely reflecting the lead responsibility house

builders have in marketing Help To Buy Equity Loan property. Other commonly

mentioned sources included online/ website sources, Help to Buy agents and

mortgage lenders/ advisors. Around one in ten mention these as their main source of

information.

Table 5.7 – Who was your main source of further information about the

assistance available through the help to Buy Equity Loan scheme?

Percentage

A house builder

49%

Online / website

14%

A Help to Buy agent

10%

Mortgage lender / advisor / broker /

Independent Financial Adviser

Family / Friends / Colleagues

Other media – press, TV, radio

Myself

Estate agent

Solicitor

Bank

Other

Not specified

Don’t know

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

Further analysis highlights some spatial variability in information sources with, in

particular, those living in London more likely than the population overall to get their

information from the internet (33%) or from a mortgage lender / advisor / broker or

independent financial advisor (19%), and less likely to get information from a house

builder (31%). Further, those who had no awareness of the Help to Buy Equity Loan

scheme when they first started to look to move were more likely than those were

aware to have got most of their information from a house builder (59%).

Who is initiating first contact?

Overall, the majority (84%) of respondents were pro-active in initiating contact to find

out more about the scheme, while one in ten (11%) say they were approached by

the organisation or individual who was the main source of information.

Respondents were most likely to take the lead in initiating contact regardless of who

was the main source of information as indicated in Table 5.8 below. There is no

evidence to suggest that house builders are any more likely to have initiated contact

than other sources (12% compared to 11% overall).

Table 5.8 – Sources of information and initiating contact

Main source of

information: Base size

in brackets

I first

contacted

them before

they contacted

They first

contacted me

before I

contacted

them

Don’t

know

TOTAL

A house builder (241)

86%

12%

100%

A Help to Buy Agent (49)

83%

100%

Base: 241 purchasing property using Help to Buy Equity Loan, May/ June 2015

Understanding the financial commitment

An issue raised in the supply-side interviews, particularly by lenders and Help to Buy

Agents, is that those using Help to Buy Equity Loan do not have a full understanding

of the financial commitment involved. However when respondents were asked

directly about their understanding, as shown in Figure 5.13 below, a majority (58%)

say they understand a great deal about the financial commitment of the equity loan

while a third (34%) say they understood a fair amount about this. Less than one in

ten (8%) say they knew ‘not very much’ or ‘nothing at all’.

Possibly reflecting their previous experience, those who are not first-time buyers,

who have previously owned and who have higher incomes are more likely to say

they know a great deal or fair amount about the financial commitments. Analysis also

highlights some spatial differences with those in the Homes and Communities

Agency Operating Areas covering East & South East / London (12%) more likely

than those in the Operating Area of the Midlands (5%) to say they know not very

much / nothing at all.

Figure 5.13 – Understanding of the equity loan financial commitment

Version 1 | Internal Use Only)© Ipsos MORI

Q How much, if at all, do you think you fully understood your financial commitment of the equity

loan when you bought your property?

58%

34%

Don’t know (*%)

A great deal

Not very

much

Not at all (2%)

% Great deal/ fair amount

A fair

amount

97%

96%

95%

45%

17%

12%

11%

Equity Loan amount (£75k+)

Non first-time buyer

Midlands

Previously owned

Income at purchase (£55k+)

Dissatisfied with process*

Intend to move in next year

East & South East & London

Single person hh

Previously living with parents

% Not very much/ not at all

* Small base size

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

Respondents are also confident in their ability to pay mortgage payments and the

equity loan element both when thinking back to the time of the purchase and at the

time of the interview. As indicated in Table 5.9 below, nearly nine in ten respondents

(87%) said they were very confident in their ability to pay mortgage repayments at

the time of the purchase and 88% say they feel very confident now.

Respondents are less confident in being able to repay the equity loan element,

although more than nine in ten respondents say they are either very or fairly

confident both at the time they bought and now. In contrast, around one in twenty

respondents say they are either not very or not at all confident in repaying the equity

loan element.

Table 5.9 – Confidence in ability to pay mortgage payments and the equity

loan element at the time of purchase and at the time of the interview

Your ability

to pay the

mortgage

repayments

(then - 501)

Your ability to

pay the

mortgage

repayments

(now – 499)

Being able to

repay the

equity loan

element

(then - 501)

Being able

to repay the

equity loan

element

(now - 499)

Very confident

87%

88% 60%

63%

Fairly confident

12%

11% 32%

29%

Not very confident

* 5%

Not at all confident

- 1%

Don’t know

* 2%

None

- -

TOTAL

100%

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

* Indicates a value greater than 0 but less than 1%

There is some spatial variability in confidence levels for both aspects, with those

living in the Homes and Communities Agency Operating Areas covering the East &

South East / London more likely to be confident than those living in the Operating

Area covering the North for example. Understanding of the Help to Buy Equity Loan

commitment is also associated with increased confidence; those who understand a

great deal (91%) are significantly more likely than the population overall to be very

confident.

Rating the Help to Buy Equity Loan process

Respondents were asked to rate the overall experience of buying a property using

Help to Buy Equity Loan as well as the extent to which they felt the scheme was

more beneficial to the house builder than to them. Results are presented in Figure

5.14 below.

Respondents are very positive about the experience of buying using Help to Buy

Equity Loan. Seven in ten (70%) are very satisfied, and a further quarter (23%) are

fairly satisfied while three per cent say they are either very or fairly dissatisfied.

Figure 5.14 – Overall satisfaction with the Help to Buy Equity Loan process

Version 1 | Internal Use Only)© Ipsos MORI

Q Overall how satisfied or dissatisfied were you with the experience of buying a property using

the Help to Buy Equity Loan scheme?

93%

Don’t know (*%)

Satisfied

Neither/

nor

Dissatisfied

97%

96%

95%

89%

83%

Mortgage amount (£175k+)

Previous tenure - private

rented

Understanding Equity Loan

comitment

London

Intending to move in next year

16-24

% Satisfied

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

Satisfaction levels are consistently high across the population although those

purchasing more expensive property and those with higher mortgage amounts

(£175,000+) are most likely to be satisfied, as too are those who previously rented

accommodation and those who say they have a good understanding of the Equity

Loan commitment.

In contrast, younger respondents (under the age of 25) are significantly less likely to

be satisfied than the population overall (83% compared to 93%), although

satisfaction ratings remain high.

As is indicated in Figure 5.15 below, a majority of respondents (54%) also disagree

that ‘buying a property using this assistance has been more beneficial for the house

builder than it has for me’ while just over a fifth (22%) agree.

Further analysis indicates that first-time buyers are significantly more likely to agree

that Help to Buy Equity Loan has been more beneficial for the house builder (24%)

as too are those living in larger (four or more person) households (30%) and those

who previously lived in rented accommodation (27%).

Figure 5.15 – Who has benefitted more from Help to Buy Equity Loan?

Version 1 | Internal Use Only)

22%

19%

54%

Don’t know

Agree

Neither/

nor

Disagree

30%

27%

26%

25%

24%

4 + persons in hh

Previously renting

Equity Loan Amount (<£25k)

South & South West

First time buyer

% Agree

Q To what extent do you agree or disagree with the following statements about buying a property

using the Help to Buy Equity Loan scheme - Buying a property using this assistance has been more

beneficial for the house builder than it has been for me

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

5.6 Conclusions

Analysis of survey results provides evidence that Help to Buy Equity Loan has

helped to improve access to the homeowner market. While a significant majority

were already looking to buy property, the tenure expectations of first-time buyers and

single person households in particular show a greater tendency to have shifted from

renting to buying.

A majority say they started to look for property to buy sooner than they otherwise

would have and younger purchasers and those with the lowest deposit amounts

were more likely to agree that access to homeownership was quicker. The average

deposit amounts of those using the scheme are below national estimates, which at

the very least suggest Help to Buy Equity Loan is relieving some of the pressure on

deposit amounts, and most are not using additional sources of finance to help with

their deposit. There is though some variability: non first-time buyers and those living

outside of London, the South East and East, are less likely to have saved for longer

to raise a deposit.

The survey also provides evidence that Help to Buy Equity Loan has also assisted

progression in the homeownership market. The majority said that they would not

have been able to buy the same property without assistance and most agreed the

scheme had helped them to buy property that was bigger or in a better area. A

majority indicate that the property they moved in to with the assistance of Help to

Buy Equity Loan was better than their previous accommodation both in relation to

quality and space.

There remains, however, a significant minority who say they feel unable to move up

the property ladder now and it is those at the lower end of the market (living in flats,

in smaller sized property and with lower household incomes) where this sentiment is

most apparent.

The experience of buying a property with the assistance of Help to Buy Equity Loan

is largely positive among this group who have successfully been through the

process. A majority were aware of the scheme when they first started to look for a

property and most say they were satisfied with the experience (seven in ten say they

were very satisfied).

Concerns expressed by some lenders and agents about a lack of consumer

understanding about the scheme are in limited evidence among this group of

respondents. A majority said they had a great deal of understanding about the

financial commitment of the equity loan when they bought and they continue to

remain confident in their ability to pay mortgage repayment and the equity loan

elements. Only one per cent of the total sample say they intend to move within the

next five years because of mortgage affordability concerns.

House builders were the main source of information about the scheme and most

respondents said they, themselves, initiated contact when looking to find out more.

The sentiment that the scheme has been of more benefit to house builders than to

consumers is not widely held, although it is a view more commonly held among first-

time buyers, those living in larger households and those living in the Homes and

Communities Agency Operating Area covering the South & South West.

Chapter 6: Assessing additionality

This chapter draws on the demand and supply-side perspectives presented earlier to

make an assessment of the additionality provided by the scheme to date. Here

‘additionality’ has been defined as the number of extra new homes built as a result of

the Help to Buy Equity Loan policy, over and above what would have been built in

the absence of the policy. This will include helping people buy a bigger home than

they might otherwise have afforded. Thus, in terms of value for government money,

additionality is the proportion of new homes built since the introduction of the

scheme that can be said to be a direct result of the policy.

It is recognised at the outset that there are inherent challenges in making such an

assessment. Introduction of the policy in April 2013 means it is not possible to

establish any meaningful counterfactual and disentangling the effects of the policy

from other related policy initiatives adds further complication. Furthermore the

current assessment of additionality has to be considered in the context of the overall

cycle of the scheme as well as changes in the wider economy and housing market

(including the housing market cycle).

With these challenges in mind, the analysis seeks to produce a best estimate of

additionality through the triangulation of primary and secondary data sources

presented in earlier chapters. This chapter also considers wider market additionality

and thus the potential impacts on new build output. It also discusses other factors

likely to impact on the overall market and Help to Buy Equity Loan market over the

longer term, to offer some predictions on future housing output.

6.1 Defining additionality

On the demand side, additionality is defined as allowing a purchase that would not

otherwise have taken place. Whilst this focused definition of additionality is one

which lenders and developers are most likely to identify with, it is also important to

recognise that additionality in its broader sense can be much more than the

identification of people who faced a binding (in this case financial) constraint. For

example, there will be those who have used Help to Buy Equity Loan even though

they do not face a binding financial constraint but otherwise may not have entered

the market because of their perception of other risk factors such as unemployment or

risk of indebtedness for example.

Additionality is also about extending the choices available in the market which in turn

results in additional demand of all types and notably in this case, transactions

involving new homes. Further it is about loosening the financial and other constraints

facing developers which may have limited the capacity to expand in the face of

projected demand.

There are also likely to be a range of second round and indirect effects which are

likely to impact on a broader view of additionality. In particular increased confidence

amongst consumers, house builders, lenders and others is an important

consideration impacting upon both demand and supply. Consumer confidence to

enter the market engendered by this being a government sponsored scheme as well

as through the creation of a more active sales market driving up the appetite to enter

the market are all part of this. It is these factors that are considered when wider

market additionality is referred to in this analysis. On the other hand increased

demand for new homes may come, in part, at the expense of demand for existing

homes.

In thinking about additionality we have to be mindful of what was happening anyway

in the cycle. While developers were less than optimistic and saw themselves facing

financial and other constraints that could have further reduced investment, recovery

was slowly getting underway at the time the policy was introduced and this upturn,

while anything but robust in itself, would have led to some increased confidence and

thus more demand and greater supply. In assessing additionality of the Help to Buy

Equity Loan policy we seek to separate out and give further consideration to these

effects in the sections that follow.

6.2 Demand-side additionality

To make an assessment of demand-side additionality we draw on primary data

collected through the telephone interview survey of 501 respondents who have

purchased property with the assistance of Help to Buy Equity Loan. A random

sample was selected from a sample frame of all Help to Buy Equity Loan purchasers

held by the Homes and Communities Agency up to January 2015. The assessment

of demand-side additionality therefore covers a representative sample of those that

have bought their property with the assistance of Help to Buy Equity Loan between

April 2013, when the policy was introduced, and January 2015.

Interviews were completed in a three week fieldwork period between 11

May and

June 2015 and data has been weighted to be representative of this population in

relation to key characteristics such as first-time buyer status, Homes and

Communities Operating Areas, property size and date of completion. As such survey

data provides robust data to make an assessment of the characteristics, perceptions

and experiences of the population of purchasers who have used Help to Buy Equity

Loan. Fuller details of the telephone interview approach are in Appendix 1.

The assessment of demand-side additionality uses survey responses to estimate the

proportion of purchasers who would not have been able to buy their property without

the assistance of Help to Buy Equity Loan. As indicated above, this approach does

not take account of wider market additionality factors, which are not considered as

part of the demand-side assessment.

Respondents were asked a number of questions relating to their ability to afford to

purchase property without the assistance of Help to Buy Equity Loan. It is important

to recognise that the analysis of these perception-based questions assumes that

respondents are answering from a position of knowledge about the housing market,

the mortgage market and their own personal finances, and have accurately recalled

their position at the time of purchase.

To limit the risk of over-stating additionality the assessment draws on a combination

of responses to a number of survey questions to identify the proportion of the survey

sample that say they would have been unable to have purchased a property without

the assistance of Help to Buy Equity Loan. These questions include:

• Q18a - I would have been able to buy a property I wanted anyway without this

assistance (Agree/ Disagree

);

• Q19a - do you think you would have been able to buy this same property

without the assistance of the Help to Buy Equity Loan scheme or not? (Yes/

); and

• Q19b - and do you think you would have been able to buy a similar property

that was NOT new build and being sold by its owner. By similar I mean in

terms of type, size and location? (Yes/ No).

The assessment of demand-side additionality includes any respondent that said they

would not have been able to buy a property anyway without Help to Buy Equity Loan

assistance, and also who would not have been able to buy the same property they

moved into without assistance and who also would not have been able to buy a

similar property in the existing (second-hand) market without assistance.

Analysis presented earlier in this report has shown that a majority of the survey

sample indicated that the scheme enabled them to buy a larger property than

otherwise would have been possible without assistance. However, the assessment

does not filter out those who, in theory, could have afforded a smaller property either

in the new build or existing market without assistance. It is assumed that those

moving to larger property who could have afforded smaller property without

assistance are still making a contribution to additional demand just for a larger

property unit than otherwise would have been possible.

The analysis indicates that a total of 43% of the respondents in the sample

survey say they would not have been able to afford, without assistance, the

property they wanted and moved into, nor a similar property in the existing

market.

This provides the best central estimate of additionality, while recognising that

accounting for some who might have bought smaller new built property would lower

this estimate. Figure 6.1 below summarises the results of this assessment.

Includes those who say ‘neither/ nor’ and ‘don’t know’

Includes those who say ‘don’t know’

Figure 6.1: Assessment of demand-side additionality

Total sample 501 – 45 could afford any without Help to Buy assistance (9% of total sample)

18 – 4% of all

sample

Q18a

Q19a Q19b

72 – 14% of all

sample

9 – 2% of all

sample

17 – 3% of all

sample

40 – 8% of all

sample

84 – 17% of all

sample

Q18a I would have been able to buy a property I wanted anyway without this assistance (Agree/

Disagree)

Q19a Do you think you would have been able to buy this same property without the assistance of

the Help to Buy Equity Loan scheme or not? (Yes/ No)

Q19b Do you think you would have been able to buy a similar property that was NOT new build and

being sold by its owner. By similar I mean in terms of type, size and location (Yes/ No)

215– 43% of

all sample

Demand-side additionality

estimate:

43% of total sample (215) say they

could not

afford any without Help to Buy assistance

This analysis indicates that of the total sample of 501 respondents:

• 43% (215) say they could not have afforded any without assistance.

• 17% (84) say they could not afford a property they wanted or new build

without assistance, but could afford a similar property in the existing market.

• 14% (72) say they could not afford the new build property they moved into or

similar property in the existing market without assistance but could afford a

property they wanted.

• 8% (40) say they could not afford the new build property they moved into

without assistance, but could afford a property they wanted and a similar

property in the existing market.

• 4% (18) say they could not afford a property they wanted without assistance

but could afford new build or similar property in the existing market.

• 3% (17) say they could not afford a similar property in the existing market

without assistance but could afford the new build property they moved into

and could afford a property they wanted.

• 2% (9) say they could not afford a property they wanted or a similar property

in the existing market without assistance but could afford new build.

• 9% (45) say they could have afforded all without assistance.

100

Table 6.1 below shows the characteristics of those identified to be contributing to

demand-side additionality compared to those not identified to be additional as well as

the survey population overall.

A key consideration here is whether the policy has enabled those contributing to

additional demand to access the new build market with lower deposit and income

amounts. For this analysis income, deposit and purchase price information captured

as part of the purchase process have been matched to survey responses where

permission to match data has been given.

Results indicate that those identified to be additional used significantly lower deposit

amounts to purchase their property with the assistance of Help to Buy Equity Loan

than those not identified to be additional. However, comparisons of average (mean)

gross household income levels at the time of purchase indicate no statistically

significant differences. Among those identified to be additional the average gross

household income at the time of purchase was £46,658, compared to £47,339 for

those not identified to be additional and £47,050 across the sample population as a

whole.

Looking specifically at first-time buyers identified to be additional, their average

(mean) gross household income was £43,483 at the time of purchase, lower than the

national average of all owner-occupiers with a mortgage who were first-time buyers

and resident for less than 5 years (estimated to be £47,528

by the most recent

English Housing Survey covering 2013-14 which is therefore not totally comparable).

The median income at the time of purchase of all first-time buyers identified to be

additional was £39,827, which is not greatly different to national estimates of median

income of all first-time buyers (estimated to be £38,019 from the latest available data

from the Council of Mortgage Lenders covering Quarter 2 2013 to Quarter 1 2015

Those identified to be additional are also significantly less likely to be aged under 25,

significantly more likely to have purchased a detached property, and significantly

less likely to have purchased a flat, than those not identified to be additional.

There are no other discernible differences in relation to other characteristics

presented, although to some extent this is to be expected given that the focus of the

analysis is on a specific cohort of the population (those assisted by Help to Buy

Equity Loan) who in many respects already share similar characteristics.

Based on household reference person and partner at £914 per week - See

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/445547/Chapter_3_Owner_occupi

ers.pdf

Derived from data produced by the Council of Mortgage Lenders based on a crude average of median incomes

between Quarter 2 2013 and Quarter 1 2015. See https://www.cml.org.uk/industry-data/ Note this will also

include those who have purchased using Help to Buy Equity Loan

101

Table 6.1: Characteristics of those identified to constitute additionality

Characteristics

Additionality

group

Non-

additionality

group

All

Ave (mean) gross income at purchase £46,658 £47,339 £47,050

Ave (mean) deposit amount

£15,550*

£18,103

£17,019

Ave (mean) purchase price

£214,651 £211,540

£212,860

First-time buyer

Yes

81%

83%

82%

19%

17%

18%

Work status

Working full-time

91%

94%

93%

Other

Age

16-24

6%*

12%

25-34

54%

52%

53%

35-44

28%

27%

28%

55-59

11%

10%

Previous tenure

Living at home with parents

23%

25%

24%

Previously renting (Social or Private)

54%

52%

53%

Previously owning (outright or with mortgage)

20%

18%

19%

Household size

1 person

16%

19%

18%

2 persons

40%

3 persons

23%

21%

22%

4+ persons

21%

20%

Ave household size

2.5

2.4

Homes & Communities Agency Operating

Areas

East & South East

19%

London

Midlands

26%

North

30%

South & South West

21%

19%

20%

Property size

1 or 2 beds

27%

3 beds

43%

50%

47%

4+ beds

30%

23%

26%

Property type

Flat

11%*

18%

15%

Terraced

31%

Semi-detached

26%

27%

Detached

32%*

25%

28%

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

* Indicates statistically significant difference between additionality and non-additionality group

102

6.3 Developer and lender perspectives on additionality

Turning to the supply side, developer and lender perspectives are considered further

in this section. These are based on in-depth semi-structured interviews with senior

representatives from developers covering the vast majority of the Help to Buy Equity

Loan market together with representatives from all the major lenders involved (see

Appendix 1 for further details). The focus is very much on the developers as the

funders are in large part responding to the demand generated by the former.

Supply additionality from the point of view of developers

Large developers were all very positive about the scheme and have used Help to

Buy Equity Loan from the beginning. Small and medium sized developers saw it as

positive but among those interviewed there were relatively few sales.

The large developers see additionality mainly in terms of whether they undertook

more investment as a result of their sales. Using this definition they saw four main

sources of additionality:

(i) Stopping possible falls in activity rates after April 2013

(ii) Increases in the demand for new build properties including Help to Buy

Equity Loan sales which lead directly to higher levels of output;

(iii) The confidence that Help to Buy Equity Loan has added to the general

market (including more interest in new build rather than existing units)

which has led developers to increase starts above pure 1 sale to 1 start

levels; and

(iv) As a result of greater confidence and cash flow the capacity to buy land

and to increase activity levels in line with expanding business plans

and in some cases above these levels.

The small and medium sized developers were to some degree also affected by (i).

With respect to (ii) in the main they have had relatively little direct experience –

although some had been successful on particular sites and stated this has speeded

up development; (iii) is seen as particularly important and very positive; while (iv)

depends on involvement. These sources of increased investment and therefore

starts are considered in further detail below.

In the analysis that follows, source (ii) relates to the estimate of additionality (43%)

discussed above, whereas the remaining sources relate to wider market additionality

elements.

103

(i) Stopping possible falls in activity after April 2013; the position in April

2013

Almost all large developers who were interviewed stated that they had their own

partial equity schemes running before Help to Buy Equity Loan but they would not

have been able to continue these schemes. Some gave estimates of the effect on

their balance sheets of between £8m and £50m. These are not enormous numbers

but their balance sheets were under particular strain, so it is reasonable to assume

that, as they stated, in the face of the lack of an effective government scheme plus

the rundown/closure of their own schemes, their development decisions would have

been more conservative.

Some large developers simply stated that they would have reduced output without

the scheme. Two quotes highlight this; ‘output would have ground to a halt’ and

‘output levels would have been at least 50% below current levels’. These may be

extreme views but more generally developers saw no reason for optimism in April

2013 other than the introduction of the Help to Buy Equity Loan scheme, which they

welcomed as market led and relatively straightforward.

The evidence in Table 6.2 below with respect to 2012/13 versus 2011/12 is that

private starts were falling quite rapidly – by around 5,300, not far short of 5%. The

implication of developer comments is that this fall would have continued and more

rapidly. Instead what was observed was a very rapid increase in starts especially in

the first year.

Table 6.2 Private Enterprise Starts and Completions in England 2007/08 to

2014/15

Financial Year

Private Enterprise

Starts in England

Private Enterprise

Completions in

England

2007-08

146,160

147,170

2008-09

65,560

113,800

2009-10

73,770

93,030

2010-11

84,710

83,180

2011-12

87,300

89,120

2012-13

81,980

84,550

2013-14

106,750

89,690

2014-15

115,410

96,870

Source: Department for Communities and Local Government Live Table 231 and 232 (unpublished

management information)

104

(ii) Increases in the demand for new property leading directly to

additional housing output

Large developers all saw Help to Buy Equity Loan as adding to demand and

suggested that they were selling from 15% to over 50% to Help to Buy Equity

Loan purchasers. Most stated they were closer to the upper end.

Table 6.3 below shows the proportion of new build and total transactions that were

Help to Buy Equity Loan using national Land Registry data. They suggest there is a

lot of volatility and seasonality but once the scheme was fully operational the

proportion of Help to Buy Equity Loan ranged from around 27% to over 40% of new

build transactions (June 2015 is clearly an outlier - and will probably be revised) as

the proportions generally vary systematically with overall new transaction rates,

reflecting capacity.

Excluding the early months of the programme and June 2015 as an outlier, we take

as a reasonable average for the Help to Buy Equity Loan contribution to all new build

transactions around one third, i.e. 33%.

105

Table 6.3 The Contribution of Help to Buy Equity Loans to total transactions

and New Build Transactions in England over time, April 2013 – June 2015

Month

Help to

Buy Equity

Loan

trans-

actions in

England

Trans-

actions in

England

Help to

Buy

Equity

Loan as

percent of

total trans-

actions

New Build

Trans-

actions

Help to Buy

Equity Loan

as percent

of New

Build trans-

actions

2013

Apr

48,769

4,835

May

318

63,349

6,028

Jun

1,777

63,011

10,314

17%

Jul

775

70,450

4,818

16%

Aug

1,376

75,995

6,190

22%

Sep

1,794

66,568

6,709

27%

Oct

1,744

73,179

6,348

27%

Nov

2,346

78,935

7,310

32%

Dec

3,886

75,864

10,557

37%

2014

Jan

1,175

62,435

4,318

27%

Feb

1,628

62,207

5,239

31%

Mar

2,779

64,284

7,196

39%

Apr

1,870

67,024

6,166

30%

May

2,369

73,799

7,112

33%

Jun

4,538

77,112

11,791

38%

Jul

1,651

80,680

6,100

27%

Aug

1,958

83,876

6,492

30%

Sep

2,238

75,266

7,101

32%

Oct

2,211

82,259

7,156

31%

Nov

2,226

69,580

6,647

33%

Dec

3,744

74,015

10,407

36%

2015

Jan

1,111

53,914

4,029

28%

Feb

1,328

54,853

4,727

28%

Mar

2,485

61,134

7,291

34%

Apr

1,773

57,232

5,614

32%

May

2,549

64,250

5,593

46%

June

4,745

67,028

5,845

81%*

Sources: Transactions in England, Land Registry, 2015; New Build Transaction Data, Land Registry

Price Paid Data, various years (accessed 17 October 2015); Help to Buy Transaction Data,

Department for Communities and Local Government, 2015c, data published 09 September 2015

* Figure likely to be amended in future revisions to published data

Within this total, the developers were asked what proportion of Help to Buy Equity

Loan buyers needed the assistance of Help to Buy to purchase the dwelling. Figures

ranged from around 20% to over 50% with many saying perhaps around half.

Clearly this is their own perception based on evidence from their understanding of

their customers. The developers were aware of the difficulty of interpreting these

figures in that those who could have done without might well still have purchased a

new build property. The figure is used only to show that purchasers’ (assessed using

the interview survey) and developers’ views are broadly comparable.

106

All agreed that supply was demand led so that sales lead to starts on at the least a

one to one basis – so if an Help to Buy Equity Loan sale is additional there will

be an additional new build unit. It is therefore appropriate to use the demand-

side estimate based on purchasers’ own understanding of their position as the

definition of additionality spelt out at the beginning of this chapter.

On this basis (thus excluding the three wider market additionality elements

mentioned above), we use the demand-side figure of 43% as a central estimate of

additionality.

Then looking at this definition of additionality in terms of new transactions (and

therefore as a proportion of housing output) we then apply this to the average 33%

contribution made by Help to Buy Equity Loan sales to total new build transactions.

This allows us to estimate the direct impact on supply as equivalent to

contributing 14% to new build output (0.43 x 33% = 14.2) since the introduction of

the policy in April 2013 to June 2015.

Applying the slightly higher estimates from most major developers of about half

would raise the proportion of total new build units that they saw as additional to

16.5% (0.50 x 33%) to June 2015.

(iii) Increased market confidence generated by Help to Buy

Again looking at the potential impact on new housebuilding, the developers agreed

that Help to Buy Equity Loan had increased the preparedness to buy among buyers

in general – including for new units. Total transactions had therefore increased.

Developers’ confidence was thus also increased leading to more starts by a

proportion that cannot be directly estimated but was seen as undoubtedly more than

one to one.

The 24,000 rise in starts from 2012/13 to 2013/14 can be regarded as a major shift in

confidence in the market especially as completions only rose by 5,000. This

suggests that, at the margin, up to 5 new units were being started for each

completed unit in the year after the introduction of the scheme. This implies that

developers’ confidence in the market overall increased so they were prepared to

expand production across the market. Without Help to Buy Equity Loan the numbers

of units started would therefore be likely to have been considerably fewer than the

observed levels of market sales.

By 2014/15 there is a closer relationship between private sector starts and

completions with starts growing by almost 9,000 and completions, which now include

some of these earlier starts, increasing by around 7,000 units. This suggests that:

• the initial very large impact on starts was associated at least in part with the

Help to Buy Equity Loan scheme;

• this impact has diminished over time as activity levels have risen; and

• even though starts are leading to completions quite slowly, there is still an

appetite for increasing starts by more than sales based upon the developers

expectations of growing market demand.

107

(iv) Increases in house builder capacity in longer term

Most developers clarified that they were now in a much stronger position to buy land

and to work towards expanding output as a result of the Help to Buy Equity Loan

programme. They also indicated that they would have cut output levels were the

scheme to be phased out – as had occurred to an extent in Scotland when the

money was exhausted for a period. Some talked of aiming to reach 2007 activity

levels over the next two years; a small number had already done so and intended to

continue to expand.

At the present time the data on starts and completions suggest some continued

although not very robust expansion - Starts in Quarter 4 2014 were down (to

25,180), Quarter 1 2015 showed a significant recovery (to 39,430) but Quarter 2 was

somewhat down again (to 35,960). Completions have increased somewhat in all

three quarters and were 36,890 in Quarter 2 2015, a figure not reached since 2008.

The information drawn from the annual reports from a selection of the largest

developers supports the view that we have seen a significant ramping up over the

period and that plot acquisition and land banks have grown substantially enabling

continued growth over the next few years. The outlook seems positive (see Table

A3.3. in Appendix 3). Evidence from across all types of developer drawn together by

Lloyds research team is also positive with up to a third of turnover being reinvested

in their businesses (Lloyds Bank, 2015).

Lenders views on additionality

This is based on in-depth, semi-structured interviews with senior representatives of

lenders selected from a list of lenders participating in Help to Buy Equity Loan

provided by the department. The top eight lenders were selected as measured by

their lending volume to the programme. Between them this covered the vast majority

of loans made. A further two of the largest lenders, as measured by the annual

Council of Mortgage Lenders list of the 20 largest lenders, who were not participating

in the scheme were selected and interviewed.

Lenders did not feel this scheme had negatively impacted upon other government

supported schemes, like shared ownership. However, specifically with respect to

more new homes there was general recognition that the scheme had assisted the

credit market and consumer confidence. A number of lenders suggested that there

was limited evidence of a large uplift in new build output but then posed the

counterfactual of what if it hadn’t existed.

There was a view that the scheme had reinforced an already existing, but not well

entrenched, improvement in the market and thus might be seen as pro-cyclical. It

had eased the return to higher loan to value lending and also may have influenced

the type of homes being built as well as the mix in transactions between new and

existing dwellings. Moreover, it was recognised that developers had rebalanced

books and become profitable and this had fed into more expansive plans, albeit that

the market was still ‘fragile’.

108

The estimates as to how much new development had increased varied greatly from

0 through 10% increase in starts, (reflecting resource constraints, like materials,

labour, land etc) with most but not all thinking a 25% increase was too high. It was

argued that it would be difficult for the top 3 developers to sustain the growth they

had achieved and thus a question as to what might happen in the future? Broadly it

was felt what had happened to date was aligned to a typical 5 year plan for any

recovering market – a cautious return to growth – so the question was whether this

would have actually occurred without Help to Buy Equity Loan.

The entry of more lenders into the new build market is an important development

and one which helps underpin market capacity discussed above in the developer

assessment. This is a demand led market and mortgages make that demand

effective. Lender activity is a re-enforcing mechanism, helping to support and sustain

the operating environment. Prior to the Help to Buy Equity Loan policy new build

lending was concentrated amongst a very few of the largest lenders (Lloyds Banking

Group and Nationwide dominated with Barclays, Royal Bank of Scotland and

Santander as secondary). Since the introduction of Help to Buy Equity Loan, this

market has expanded to 18 lenders, with more considering entering, and the

dominance of the biggest two lenders being eroded over time. It has become a more

competitive and effective market as a consequence with both product and process

improvements reflecting the entry of more lenders seeking market share.

6.4 Bringing the evidence together

While this chapter attempts to quantify the direct additionality impact on supply, it is

not possible to give detailed quantification of the three wider market additionality

elements identified (offsetting decline, market confidence, developer financial

capacity) which are not related directly to actual Help to Buy Equity Loan sales.

However developers were very clear they were extremely important – particularly

with respect to overcoming the fragility of the market in 2013.

Table 6.4 below provides a summary assessment of these elements alongside some

potential scenarios of the impact of Help to Buy Equity Loan.

109

Table 6.4: Likely additional impacts of Help to Buy Equity Loan on new starts

Direc

impacts

Offsetting

decline

Additional

market

confidence

Increased

developer

capacity

(i) Stopping

decline

Offsetting

continued

decline – 5%

to10% of total

starts

(ii) Direct demand

impact

14% - 16.5% of

new

starts

(iii) Market

confidence

Increase in

starts rising to

5 x sales in

2013/14 but

not all as a

result of Help

to Buy Equity

Loan. Assume

- 20% in first

two years

falling back to

10% in the

third year as

confidence

stabilises.

(iv) Longer term

capacity

Financial

stability is

already allowing

more optimistic

5 year and

longer business

plans based in

part on the

continuation of

the scheme.

As there does not appear to be much double counting of these elements, especially

as (iv) has, in the main, yet to occur, it is possible to combine these elements to

develop an overall picture of the dynamics of additionality from the Help to Buy

Equity Loan scheme.

In terms of timing more generally, the first impact, (i) offsetting decline, occurs in the

first year. The second (ii) is an estimate based on secondary data and takes only a

proportion as directly related to Help to Buy Equity Loan. The third (iii) applies to

starts in 2013 and thereafter can be expected to decline. The fourth (iv) is largely yet

to occur.

110

An estimate of the impact on new housing starts in 2013/14 might range from a

minimum of 14% (ie, including only the lower estimate of (ii)) and no other impact) to

a maximum of over 45%, taking account of the offset in decline of 10% (from i) the

higher estimate of 16.5% from (ii) and an estimated 20% from the increase in

confidence from (iii)).

In 2014/15 we assume no offset in decline but a continued impact on confidence

generating 20% more starts - so the range is from 14% assuming only the lower

level of direct impacts to a maximum of 16.5% direct effect plus 20% from increased

confidence ie 36.5%.

Thereafter the impact of (iii) on starts is assumed to decline to around 10%. So,

taking the lower direct effect of 14% plus 10% for confidence suggests a figure

around 24% for 2015. This might rise further as capacity (iv) increases but could also

decline if direct impacts are dampened. Table 6.5 below summarises the dynamics

of all these elements of additionality over time.

Table 6.5: Summary of the dynamics of additionality from the Help to Buy

Equity Loan Scheme over time

Additionality range

2013/14

2014/15

2015-

Minimum impact on increase in

new build output

14%

14% 14%

Maximum impact on increase in

new build output

45%

37% 24%

6.5 A longer term view

Predicting how either the overall market or the Help to Buy Equity Loan market might

develop over the economic cycle and specifically to 2020/21 is highly challenging,

given the number of variables at work. All that can be done is to suggest possibilities

built around our view of what might happen in terms of certain key market factors.

We have taken the view that the important elements in the scenarios to 2020/21 are:

(i) what happens to interest rates;

(ii) how credit availability changes;

(iii) the likely course of economic growth;

(iv) market confidence as expressed by consumers, developers and lenders; and

(v) arising from these factors, the possible trajectory of house prices

111

On the demand side, economic growth, sustained house price increases in at least

parts of the country and greater confidence can be expected to increase the

numbers of households (especially first-time buyers) who wish to buy and are able to

do so. History suggests that households, given the choice, would be more likely to

choose traditional debt financing products as their way of entering the market as

compared to partial equity so the proportions of buyers who choose partial equity

may decline - especially because of potential capital gains.

Against this, the higher interest rates that are likely to be associated with economic

growth, will reduce affordability and may make it harder to meet deposit

requirements and to pass the affordability tests associated with higher loan to value

mortgages that they may require. Both make Help to Buy Equity Loan more

attractive. The higher any interest rate rise however the more likely that Help to Buy

Equity Loan would be relatively more popular.

This demand could be increased by further tightening in the mortgage market as a

consequence of the rules now in place following the Financial Conduct Authority’s

Mortgage Market Review and the Financial Policy Committee’s macroprudential

tools in relation to loan to value and debt to income ratios (both of these aimed at

curbing an expansionary credit cycle).

Taken together, the best guess, given continued recovery in the economy, is that we

will see higher levels of housing output and transactions overall to 2020/21. Within

this total there is likely to be a smaller proportion of Help to Buy Equity Loan sales.

However, especially given the evidence from developers and funders that the

housing market remains fairly fragile at least for the next couple of years, Help to

Buy Equity Loan market will continue to be a significant proportion of new build sales

overall and a key factor in carrying the market forward to a more stable state.

Taking the central estimate of additionality (the 43% of new build transactions/ output

that government has supported through Help to Buy Equity Loan), this will decline as

a proportion although not as an absolute number – because Help to Buy Equity Loan

becomes a smaller proportion of a larger total (ie the 43% is based on a given level

of overall transactions and the assumption is that households move away from Help

to Buy Equity Loan to buying with a normal mortgage).

If we take a fairly extreme trajectory of an increase in overall sales of 40% of which

only 20% were additional sales of Help to Buy Equity Loans, the additionality figure

would drop from 43% to 36% (43% of 100 plus 20% of 40 taken together gives

51/140 or 36%). It would take far more extreme changes in the market to reduce

additionality to 20%. For instance if total sales doubled but none of that increase was

Help to Buy Equity Loan, additionality would halve dropping to 21.5% while in

numerical terms it would have remained constant.

One of the big unknowns remains how the mortgage market might evolve in the light

of the regulatory changes now in place. Informal discussions with the regulator would

suggest the Financial Conduct Authority’s view is that the market will only fully return

to a new normality by 2019 (ie, that all the changes would have worked through and

been absorbed into lending policy and practice) and that to date the new Mortgage

Market Review rules have had only a limited ‘braking’ effect because the market is

112

not in a strongly expansionary phase. That would not be the view of the industry

which would cite the cautious movement back up the loan to value curve and

continued pressure for higher deposits. Gross mortgage lending in 2014 was £203

billion, up on the £178 billion in 2013 but still well below the £357 billion of mortgage

lending in 2007. The Council of Mortgage Lenders forecast for 2015 is £222 billion

and for 2016 £230 billion, both revised down in their latest forecast. The Bank and

others note the more subdued market in 2015 but expect this to recover in 2016/17.

The Council of Mortgage Lenders suggests (Market Commentary, July 2015) that:

Although activity levels are likely to remain narrowly constrained this year and

next, we expect total mortgage lending to increase by £21 billion to £230

billion in 2016. Some of this reflects increasing loan sizes alongside stronger

house prices, but about half of the increase reflects the modest turn-round we

envisage in the numbers of first-time buyers and movers.

We would concur with the view that there will be modest growth in activity which will

continue through to 2020/21. It implies a continuing role for equity loans (in the

absence of other measures such as public or private guarantees for higher loan to

value loans). Any further tightening for more marginal buyers would make Help to

Buy Equity Loan an essential product to fill part of that gap.

In terms of the additionality estimates above, the expectations around the possible

growth in the market suggests that a sharp increase in either mortgage credit or

housing output is very unlikely to occur. Moreover any further tightening of credit

conditions would be likely to bring the proportion of households assisted by Help to

Buy Equity Loan back towards the current 43% of buyers who could not have

achieved what they bought without this support.

A more negative economic environment with falling output and declining house

prices along with concerns about the future market would reduce overall demand

and probably shift a proportion of underlying demand towards Help to Buy Equity

Loan. Even so, under this scenario the overall decline in demand would probably

suggest lower absolute levels of Help to Buy Equity Loan sales. However these

lower absolute levels of Help to Buy Equity Loan would still be a higher proportion so

technically additionality would increase.

On the supply side, we note development is demand led and therefore under the

more optimistic scenarios new output levels would continue to increase. From the

developer point of view they build to satisfy the market overall so the proportions of

Help to Buy Equity Loan do not matter greatly, except to the extent that they impact

on market confidence and support new entrants.

There is reason to believe that developers have the capacity to expand although

many business plans are still focussed on getting back to pre-crisis levels of output

rather than looking to a further expansionary phase. This reinforces the suggestion

that output expansion will continue but at a modest rate.

113

Importantly, developers are extremely conscious that any economic downturn would

put expansion in investment at risk. Help to Buy Equity Loans provide considerable

comfort by insulating developers from any retreat by lenders from higher loan to

value lending, ensures some support for demand if the market waivers and provides

a clear signal that the government is backing the housing market and housing

supply.

If in 2019 there was uncertainty about the continuation of the Help to Buy Equity

Loan scheme there would probably be a significant cutback in starts, except in areas

where the market is anyway very buoyant.

Among developers there were divergent views as to the desirable future with some

wanting to see a structured phasing out of the policy after 2020 while others thought

it should be a continuing part of the offer - especially because of its risk reduction

attributes.

Currently output of new homes in England is running at 136,300 starts and 131,000

completions in the 12 months to June 2015. This is roughly where we were at the

start of the 2000s. Then, output rose until 2007 and then declined to the end of the

decade before beginning a slow recovery. Five years into that recovery output is now

back to where it was some six years before the peak and then the collapse. While

there were exceptional features in the last cycle if the current cycle follows the earlier

pattern it would certainly support the view that we can expect continued growth to

2020/21.

Weighing up the balance of factors shaping the future market we would highlight;

(i) The housing market cycle is still moving in an upward trajectory;

(ii) Continued mortgage market constraints that will limit access to mortgages;

(iii) Continued house price inflation alongside an expanding economy with wage

growth helping to offset the impact of price rises and potential interest rate

increases;

(iv) Continued slow growth in housing supply and mortgages;

(v) In this ‘steady’ state scenario Help to Buy Equity Loans would continue to play

an important role;

(vi) The situation post 2020 could be markedly different were Help to Buy to be

withdrawn alongside the possible ending of upswing in the housing cycle.

This will require careful handling; and

(vii) At the heart of this is the continued need to reduce market volatility and

establish the basis for sound growth in both housing supply and mortgage

credit over a sustained period.

114

6.6 Conclusion

The analysis has provided a clear indication of the additionality triggered by Help to

Buy Equity Loan scheme. The scheme has made consumer demand more effective

which in turn has fed through into an increase in new housing supply backed by an

expanded and more supportive mortgage market. On this definition, 43% of Help to

Buy Equity Loan sales are additional, equivalent to contributing to 14% of total new

build output up to June 2015. Allowing for wider market additionality factors this

proportion (of total new build output) could have been as high as 45% in 2013/14

falling back to maybe 25% in 2015.

Although there were some signs of recovery in the wider housing market it is evident

that the scheme coincided with a large increase in starts which continued, if at a

slower and sometimes variable rate, and is now feeding through to completions.

Disentangling the cyclical effects from the scheme specific effects is difficult but our

estimates of additionality do point to what this scheme has achieved.

The analysis suggests that these effects will continue as starts turn into completions

lender confidence is maintained and financial constraints are reduced. However this

depends on many other factors around the economy and financial markets as well as

the continuation of the scheme.

There is a view that the residential mortgage market will have fully adjusted to

regulatory change only by around 2019. However the impact of the raft of

interventions in the financial system and their withdrawal (Quantitative Easing,

Funding for Lending Scheme, Special Liquidity Scheme as well as the prolonged low

Base Rate) will take longer to work through and this will be material to issues around

development finance and the cost of funds, both of which are important to the

developers.

The greater interest among lenders with respect to new build can be expected to

have a positive effect although constraints on high loan to value ratios may well

remain making the Help to Buy Equity Loan scheme the relatively affordable option

(much here also turns on the future of the Help to Buy mortgage guarantee scheme

ending in 2016). The policy measures now in place via the Financial Policy

Committee are designed to limit lender activity as the market strengthens. At present

we can expect the ‘braking’ effects to intensify if the market moves ahead strongly

thus limiting the expansionary nature of the market and any unduly strong return to

higher loan to value lending.

115

The recent Knight Frank survey of the House-Building industry noted (Knight Frank,

2015, p 7)

The introduction of the Help to Buy Equity Loan had an immediate impact on

the housebuilding industry in an era of relatively high price to income ratios.

The scheme, which helps buyers access better mortgage deals, resulted in

developers and housebuilders submitting higher numbers of planning

applications and taking on larger schemes. In the last year, the total number of

units in planning or under construction is up nearly 10%, according to data

prepared for Knight Frank from Glenigan. ……While the housebuilding

industry has made it clear that maintaining the extension of Help to Buy to

2020 is key, only 37% of respondents to our survey said that extending the

scheme beyond 2020 should be a priority for policymakers

With a growing economy and relatively healthy housing market there is every

prospect that the economic cycle will remain positive at least to the end of this

decade. Interest rate policy will be key but rates may well change very slowly

allowing markets to adjust. We would thus expect to see fairly steadily rising housing

output probably with some hiccups alongside a slowly expanding mortgage market. If

mortgage funding constraints remain in place alongside increased house prices and

expanded housing supply we can probably expect to see increased demand for Help

to Buy Equity Loans as a relatively affordable way of accessing the market. This has

the potential to increase the demand for new build homes because of their favoured

status in the Help to Buy Equity Loans programme and should help support

increasing output levels overall.

116

Chapter 7: Conclusions

7.1 The study

The evidence assembled in this report suggests the Help to Buy Equity Loan

scheme, introduced in April 2013, has been an important intervention in the housing

and mortgage markets in England. Whilst it is a policy that has attracted some

criticism from analysts, politicians and the media, the empirical evidence would

support the view that it has provided an important stimulus to generate a not

insignificant increased output in the housebuilding sector as well as a stronger

recovery in the mortgage market along with higher confidence amongst all these

players and consumers.

Moreover, in terms of additionality, and the specific contribution of the policy to

housing output over and above what might have happened anyway through the

general upturn in the economy and the housing market, we can evidence that it

increased demand and, through that, supply rose above what it would otherwise

have been. We estimate that since introduction it has generated 43% additional

new homes, over and above what would have been built in the absence of the

policy, equivalent to contributing 14% to total new build output to June 2015.

Accounting for wider market additionality effects on the total new build output, like

market confidence, suggests the policy could have contributed as much as 45% to

total new build output initially (2013/14) and up to a maximum of 25% of total new

build output subsequently.

Trying to disentangle the effects of a specific policy intervention in an economy with

a number of stimulus measures still in place and in a housing market with a range of

support mechanism to assist developers, lenders and purchasers is a considerable

challenge. In addition with a recovery in both the economy and the housing market

underway since around the turn of the decade we have to factor in what might be a

consequence of the upturn as distinct from the specific policy measure in question,

Help to Buy Equity Loans.

To achieve this we brought together, in a rounded assessment, a variety of sources

of published and unpublished data, including primary survey data from households

using Help to Buy Equity Loan, developer, lender and agent interviews, analysis of

secondary data on the market and the programme itself. The project did not

encompass building a formal model to assess the impact and our understanding of

work elsewhere is that the limited data available means this is not currently possible.

Since the evaluation project began earlier this year, the government has made

several important housing related announcements and not least the extension of the

scheme to 2020, and then most recently in the Autumn Statement and Spending

117

Review to 2021, the announcement of changes to the Help to Buy scheme in

London.

Based on our analysis we would draw the following conclusions:

The success of the scheme overall

Overall this scheme has been a success. It has delivered on the objectives set out

for it. Supply has increased along with builder, lender and market confidence.

Though there were divergent views about the success of the scheme both within and

between developers and lenders in the main they were positive. There was general

agreement that Help to Buy Equity Loan was a better scheme than earlier efforts,

and that it had been good for the housing market. Similarly consumers using the

scheme gave a generally positive picture of Help to Buy.

Impact

The impact of the scheme is inevitably lagged just as house building process is itself.

Having been introduced in April 2013 it was inevitable that we would only see

measurable impact emerge towards the end of our study period. However we

conclude that developers saw it as providing a source of new demand, making a

contribution to confidence and potentially adding to housebuilding activity more in the

future as momentum builds. With up to half of Help to Buy Equity Loan loans driving

sales that would not have happened without the scheme we can see its impact is

quite considerable.

We recognise that it is difficult to distinguish those who bought earlier/bigger/new

build units from those who without it could not have bought at all. However our

detailed work on consumer demand has allowed us to arrive at a sound estimate of

additionality, defined in terms of the proportion of new build activity directly

supported by the government policy (and thus paid for by government) and wider

market additionality estimates taking account of other factors such as offsetting

decline, market confidence and developer financial capacity.

Bearing in mind the caveats already raised a central conclusion from this study is

that the additionality achieved directly as a result of the government intervention is

estimated to be 43%. However accounting for wider market additionality factors

taking account of increased activity in the market overall arising from the existence of

Help to Buy Equity Loan and its impact on behaviour, the benefits to the industry,

market and government are higher.

Evidence on sales across Homes and Communities Agency Operating Areas and

the variations in the extent of decline in output after 2008, as well as the speed of

expansion of the housing supply suggest important spatial variations in terms of the

take-up of Help to Buy Equity Loan - with greater take-up outside London and the

East and South East. London in particular is simply a very expensive market which

the Help to Buy Equity Loan scheme can only partially mitigate. Elsewhere we

118

conclude the scheme has been much more effective at kick starting markets which

were in the doldrums.

Given only two years and the lead times for planning permission and starts we would

expect the full evidence of the importance of the Help to Buy Equity Loan scheme to

emerge over the next two or more years. On a number of measures we can identify

trend inflexions post April 2013 - notably with respect to private housing starts in

2013/14 - but given seasonality and the cycle there are quite a few factors to take

into account.

Consequences over the longer term

Inevitably the question will be asked who will benefit from the Help to Buy Equity

Loan scheme and what the overall balance of costs and benefits is. Again this study

does not provide a detailed cost/benefit analysis – that was beyond the scope of the

brief. It does however provide some indications.

Looked at costs and value from a government perspective we would offer a number

of conclusions of the likely consequences of the scheme over the longer term;

• It is likely that the cost to the government will be limited given that their equity

loans will be returned with house price appreciation added (the government

estimates of the returns on the scheme are discussed in the National Audit

Office report (National Audit Office,2014). Clearly much turns on the course of

house prices but over the long term the return could well be positive.

Obviously there is an opportunity cost here even if this were the case – the

£10 billion could have been spent in a different way;

• Help to Buy Equity Loan has worked to improve the overall housing market

with more activity in terms of development and sales, all of which generate

income to government, more confidence and wider impacts on economic

growth. We conclude this will continue;

• Housing supply continues to edge up and Help to Buy Equity Loan has played

a part in that expansion. This is a demand led market and Help to Buy Equity

Loan has assisted in making demand effective. With continuing mortgage

market constraints as a consequence of a range of regulatory interventions

the policy has been a timely and helpful mitigating factor;

• Somewhat speculatively we take the view the programme has also helped

shift preference between new and existing homes so that we are seeing more

activity around the former in terms of the balance of overall transactions. This

poses questions about whether more could and should be done to stimulate

the appetite for new build homes more generally (eg among older households

who need low running costs) especially given that the housebuilding industry

is demand led;

• A core benefit to government is the extent to which the Help to Buy Equity

Loan policy has specifically supported first-time buyers helping them to realise

their tenure of choice and into the longer term potentially to reduce

government welfare expenditure. The fact that over 80% of Help to Buy Equity

119

Loan purchasers have been first-time buyers suggests that the programme

has been generally well targeted;

• We would argue that a further potential benefit for government is the impact of

Help to Buy Equity Loan scheme on volatility in housing activity over the

economic cycle. Initial results suggest that Help to Buy Equity Loan improves

developer capacity to finance land purchase and maintain output levels as

well as providing greater certainty around demand. Thus while the impact so

far has been pro-cyclical - reinforcing a fragile expansion in the new build

market there is potential for the scheme to offset some downward pressures

and so help to dampen the cycle; and

• Finally we note the divergence of views between lenders and consumers in

terms of whether buyers understood the equity loan arrangement. While we

can take some comfort from our consumer research showing borrowers were

confident they understood their obligations, recent Financial Conduct Authority

research on consumer understanding of the mortgage sales process suggests

not all consumers are as confident.

Going forward

The Chancellor’s recent announcement of a scheme extension ‘to at least 2020’

does somewhat overtake this evaluation of the arguments for and against an

extension. However, it is still important to draw conclusions and point to issues that

should be addressed over the coming years - not least because he added ‘at least’.

This became material in the Spending Review when the scheme was extended to

2021.

By 2021 this scheme will be 8 years old and we would expect to see numbers of

Help to Buy Equity Loan consumers moving on. Our estimates of additionality

suggest that as the market improves Help to Buy Equity Loan is likely to decline as a

proportion of total sales. Thus although in numbers terms additionality may increase,

in proportional terms as measured in this report additionality will decline. Our best

estimate is that the market will continue to recover but only relatively slowly – so the

decline in that proportion is likely to be limited.

However, a more negative economic environment with falling output and declining

house prices along with concerns about the future market would reduce overall

demand and probably shift a proportion of underlying demand towards Help to Buy

Equity Loan. Under this scenario the overall decline in demand would probably

suggest lower absolute levels of Help to Buy Equity Loan sales, although these

would still be a higher proportion of overall sales so technically additionality would

increase.

See (see https://www.fca.org.uk/your-fca/documents/research/understanding-consumer-expectations-of-the-

mortgage-sales-process-esro).

120

It is worth reiterating that the central estimate of additionally (43%) which is the

subject of this report refers to the proportion of households that bought a new build

home but would not have been able to do so in the absence of the policy. Since

these additional sales led to additional starts on a one-to-one basis, this additional

supply is equivalent to contributing 14% to the total new build output since the

introduction of the policy to June 2015.

However, in addition to these new starts directly related to the scheme, there are

benefits to market supply as a whole, and a wider market definition of additionality

would include additional new build starts arising from general market confidence, as

well as cash flow and capacity. As such, this report suggests that Help to Buy Equity

Loan supports an expansion in the overall market.

Going forward, the stronger the growth in housing provision and the fewer the other

constraints (such as credit availability) the lower the proportion of buyers that would

not have been able to buy a new build home in the absence of the policy – but the

better the market operates and the more homes are built overall.

The extent to which Help to Buy Equity Loan is used into the future depends

significantly on what happens to the mortgage credit market. There are reasons to

suggest that the finance market may tighten further for first-time and other more

marginal buyers. In addition any increase in interest rates will adversely affect

affordability. Both of these possible modifications to the market place will make the

Help to Buy Equity Loan scheme a more valuable tool.

The research indicated there was in general, support for extension amongst

developers and lenders. But views were mixed with some arguing it was essential

while others were concerned that it created market dependence on government

intervention. Above all else, all wanted certainty so that they could develop business

plans accordingly – and all wanted the scheme to continue with a clear steer no later

than 2018 about what might happen thereafter. Developers and lenders are already

coping with a volatile housing market and policy volatility adds to those pressures. If

we are to secure sustained growth over a period of years with some prospect of

getting supply up to required levels and dealing with the backlog of unmet demand

then ensuring a stable policy environment is fundamental.

If and when the policy is to be withdrawn then this suggests there needs to be a

phased approach with a long lead into that so that plans can be modified

accordingly. One way to phase the withdrawal of Help to Buy Equity Loan scheme

would be to adjust the value limits downward over time. This would be in line with the

only major criticism of the scheme made by many interviewees.

The London and South East limit would need to remain higher than in the rest of the

country to allow purchasers to find suitable new build properties. One possibility

would be to reduce the limit to £500,000 in London and the South East and to

£350,000 elsewhere in the country. Another policy shift could be around lengthening

the 6 month rule (maximum time from exchange to legal completion) which has

proved problematic with respect to sales of flats especially in London but purchasers

could be exposed to risk if their mortgage offers lapse over this extended time scale.

121

However, in making any changes, it is extremely important to maintain the core

attributes of the scheme as simple, stable and market led.

Finally, it is important that we develop a more rounded set of market statistics and

performance indicators so that this scheme can be properly tracked over time. This

should include more data on buyer options and choices and on the flows from

enquiry through to completion. Given the recent 5 year extension of the scheme this

becomes an important priority. It also suggests that while such statistics should

provide a reasonable basis for assessing performance over time it might also be

sensible to return to primary data collection including further consumer surveys in

2018, well in advance of any decision to extend or discontinue the scheme beyond

2021.

122

Appendix 1

A1 Technical details

A1.1 Telephone interview survey

To conduct the telephone interview survey with a representative sample of

households who had purchased a property using Help to Buy Equity Loan, the

department (via the Homes and Communities Agency who have responsibility for

administering the scheme) provided an anonymised sampling frame for all those who

had used the scheme from its introduction in April 2013 to January 2015. The

sample frame included a total of 44,471 records.

A random sample selection approach using a simple ‘one in n’ selection procedure

was used to select a sub-sample (and reserve) for the survey. To do this the sample

frame was stratified by the following:

• First-time buyer/ non first-time buyer;

• Location (based on grouped Homes and Communities Agency Operating

Area);

• Property size purchased (number of bedrooms), as a proxy for house prices

and income bands which were unknown at the sampling stage.

A total of 2,500 records were selected for the main sample and a further 500 reserve

sample records were selected. The inclusion of a reserve sample was precautionary,

reflecting data protection requirements to notify all potential sampled respondents in

advance about the survey and offering them the opportunity to opt-out of they

wished.

Prior to the conduct of fieldwork advance letters were sent to all 3,000 selected

sample (including both main and reserve samples) and a two week window was

provided to opt-out (although in practice late returning opt-outs were accounted for

up to the day before fieldwork began). Potential participants were given the option to

opt-out by means of telephone, email or written communication.

In total, 112 potential respondents opted out from the survey and a further 74

advance letters were returned as undeliverable (and were also excluded from the

survey). In total 186 selected sample were excluded from the survey prior to the start

of fieldwork, accounting for 6% of the initial selected sample. Following the opt-out

period, there were a total of 2,342 sample records in the main sample and 472 in the

reserve sample. The profile of the remaining sample matched the overall profile of

the sampling frame in relation to the key stratification variables identified above.

123

Interviews were carried out using Computer-Assisted Telephone Interviewing (CATI)

with interviews lasting an average of 15 minutes. Fieldwork was conducted between

11 May and 1 June 2015.

No reserve sample was used to achieve the required 500 completed interviews and

the table below summarises outcomes from the main sample. Table A1.1 below

indicates that after taking account of bad telephone numbers (predominantly

incorrect numbers provided or captured at the point of application) and those where

no contact was established at all during the fieldwork period, a total of 501

completed interviews represent an adjusted response rate of 52%.

Table A1.1 – Telephone interview survey sample outcomes

Number

Percent

Main sample issued

2,342

100%

Bad telephone numbers

346

14.8%

Refused

149

6.4%

Completed interviews

501

21.4%

Appointment made outside fieldwork period

320

13.7%

No reply during fieldwork period

1,026

43.8%

Data from completed interviews have been weighted to be representative of the

population of those purchasing a property using Help to Buy Equity Loan up to

January 2015 taking into account first-time buyer status, location, property sized

purchased and time of completion.

The table below shows the weighted and unweighted profiles for these

characteristics and demonstrates a close fit between the achieved sample and the

overall population. The biggest difference occur by location, where the survey

marginally under-represented those in the Homes and Communities Agency

Operating Areas of the North and over-represented those in London and the South &

South West. Results presented in the report are based on weighted survey data

only.

124

Table A1.2 – Weighted and unweighted response profiles

Weighted Unweighted

Difference

(weighted –

unweighted)

First-time buyer

Yes

82% 80% +2

18% 20% -2

Homes & Communities Agency

Operating Area

East and South East

19% 18% +1

London

-2

Midlands

26% 27% -1

North

30%

26%

South and South West

20% 22% -2

Property size

1 or 2 bedrooms

27% 27% 0

3 bedrooms

47%

4+ bedrooms

26% 26% 0

Completion date

Last 6 months

10% 8% +2

6-12 months

34%

36%

-2

12-18 months

32% 33% -1

18 months +

24%

23%

Base: 501 purchasing property using Help to Buy Equity Loan, May/ June 2015

Statistical reliability

The respondents who took part in the survey are only a sample and as such it

cannot be certain that the figures obtained are exactly those that would have if

everybody had responded (the "true" values).

It is, however, possible to predict the variation between the sample results and the

"true" values from knowledge of the size of the samples on which the results are

based and the number of times a particular answer is given. The confidence with

which this prediction can be made is usually chosen to be 95 per cent - that is, the

chances are 95 in 100 that the "true" value will fall within a specified range.

125

Table A1.3 below illustrates the predicted ranges for different sample sizes and

percentage results at the "95 per cent confidence interval". Please note that this

method of calculating statistical reliability assumes a random probability survey, but

still serves as a good predictor of likely confidence intervals for interpreting results.

Table A1.3 – Sample tolerances for different sample sizes

Approximate sampling tolerances applicable to percentages

at or near these levels

Size of sample

on which survey

result is based

10% or 90%

30% or 70%

50%

100 responses

200 responses

501 responses

For example, with a sample size of 501 where 30 per cent give a particular answer,

the chances are, 19 in 20, the "true" value (which would have been obtained if the

whole population had been interviewed) will fall within the range of ±4 percentage

points from the survey result (i.e. between 26% and 34%).

When results are compared between separate groups within a sample, different

results may be obtained. The difference may be "real," or it may occur by chance

(because not everyone in the population has been surveyed).

To test if the difference is a real one, i.e. if it is "statistically significant", we again

have to know the size of the samples, the percentage giving a certain answer and

the degree of confidence chosen. If we assume "95 per cent confidence interval",

the differences between the results of two separate groups must be greater than the

values given in Table A1.4 below:

Table A1.4 – Differences required for significance when comparing sub-

groups

Differences required for significance at or near these levels

Size of sample

compared

10% or 90%

30% or 70%

50%

100 and 100

250 and 250

300 and 200

126

A1.2 Developer and lender interviews

A total of 20 in-depth semi-structured face-to-face or telephone interviews were

conducted with senior representatives of developers covering the vast majority of the

Help to Buy Equity Loan market. To achieve the target number of interviews a total

of 23 developers were contacted. There were no refusals but three could not

complete the interviews within the fieldwork period. Interviews took place in late April

and May 2015.

Table A1.5 below summarises the profile of the developers interviewed.

Table A1.5 – Developer interview profile

Notes

Large developers

Total firms

Total interviews completed

Top six

Cover 58% of all Help to Buy Equity

Loan transactions

Top 7 active sites

85% of top 7 in terms of active sites

London specific

1 regional director – included London

specific questions in interviews where

London active

Small and medium sized developers

Total interviews

Active in Help to Buy Equity Loan

One Help to Buy Equity Loan sale

No Help to Buy Equity Loan sale

Interviews included fifteen senior executives from fourteen larger developers (in one

case we interviewed two people in order to obtain specific information about the

London market as well as the national picture). These included the six largest

developers in terms of the number of transactions (in themselves covering 58% of

transactions) and six of the largest seven in terms of active sites.

The interviewees included both national and regional developers across England -

with the majority covering large parts of the country but including some who

specialised in two or three regions. As a result we obtained information on developer

experience in all regions as well as on the national picture.

127

We also interviewed five senior executives from smaller developers who were

operating in one or sometimes two regions. One had not done any Help to Buy

Equity Loan sales - although they were closely involved in discussions with the

Homes and Communities Agency; one had done one sale; the other three had

greater experience of Help to Buy Equity Loan transactions.

A total of 10 in-depth, semi-structured telephone interviews were conducted with

senior representatives of lenders selected from a list of lenders participating in Help

to Buy Equity Loan provided by the department.

The top eight lenders were selected as measured by their lending to the programme.

Between them this covered the vast majority of loans made. A further two of the

largest lenders, as measured by the annual Council of Mortgage Lenders list of the

20 largest lenders, who were not participating in the scheme were selected and

interviewed. The Council of Mortgage Lenders assisted in the set-up of telephone

interviews with the selected lenders.

The rationale for selection of developer and lender interviews throughout was to

capture a good proportion of the market but also to ensure coverage by operating

area and by type of organisation. For developers regional coverage was ensured.

For lenders small building societies were not specifically targeted for interview as

they represent a very small proportion of the market and it was felt that very little

more could be learned from their inclusion.

A further five additional in-depth interviews were conducted with individuals in

organisations representing wider developer and lender interests. These included

interviews with senior representatives within:

• The Homes and Communities Agency;

• The Council of Mortgage Lenders;

• The Home Builders Federation;

• The Federation of Master Builders; and

• The National Housing Federation

128

A2 Research materials

A2.1 Lender, Developers, Agents questions

Lenders

Background

1. When did you join the Help to Buy Equity Loan scheme? Did you place any limits

on your engagement? Some only lent to builders they already had a relationship

with , loan to value caps etc?

2. Why did you join the scheme?

3. Did you have any concerns about the scheme from a lending point of view at the

outset?

4. Do you still have any concerns?

5. How has your engagement with Help to Buy Equity Loan developed over the

years? Is your firm involved in scheme elsewhere in the UK?

Activity

6. How many loans have you made under Help to Buy Equity Loan? Average loan

to value, average income, main types of property/area/regions; typical mortgage

type?

7. How do these compare with your typical first time buyer lending?

8. Are you comfortable with the quality of the borrowers coming forward under Help

to Buy Equity Loan?

9. As a lender, has the modest size of the deposit or the complexity of the loan

arrangement (deposit, mortgage and equity loan) raised any issues?

10. Do you have any concerns as to whether customers fully understand the

implications of the loan arrangements they have entered into?

11. Have any issues arisen on remortgaging/portability/ arrears? Again does this

have any notable geographic distribution?

12. Do you have particular products and rates for Help to Buy Equity Loan

customers? Are there any Help to Buy Equity Loan buyer incentives?

Impact

129

13. Did you set exposure limits per site?

14. Has the scheme helped encourage your firm to lend on new build homes? Has

the agency arrangement given you greater comfort?

15. Has the focus on Help to Buy Equity Loan resulted in your firm reducing its

exposure in other areas of lending, eg, shared ownership?

16. Do you think the scheme has led to more new homes being built?

17. If yes, do you have any feeling for how much do you think it has increased

supply?

18. How important is it that the scheme is extended to 2020?

19. Do you expect to stay involved to 2020?

20. If this scheme hadn’t existed how do you think the new build market might have

evolved?

For Lenders not in the scheme

21. Why didn’t you join the scheme? What are/were your central concerns?

22. How might these be overcome?

23. Does your firm lend on newly built homes?

24. If not could you explain why not?

25. Do you think increasing housing supply is important?

26. Do you think the scheme has helped restore confidence and market activity?

130

Developers

Involvement in Help to Buy Equity Loan

1. When did you join the Help to Buy Equity Loan scheme?

2. Why did you join the scheme?

3. Have you stayed in for same reasons?

4. Did you market the scheme heavily/ordinarily /not at all?

Impact on firm decisions

5. Did the scheme help your firm –how?

6. Did you use FirstBuy when it was available? If so did you find it useful?

7. Did you have your own shared equity loan programme in operation before the

scheme began? If so how important was it in terms of sales?

8. Do you still offer your own equity loans? If so how does it compare to Help to Buy

Equity Loan?

9. Has the Help to Buy Equity Loan scheme been a success from your point of

view? How would you define that success?

10. Has it increased your sales? If so by what proportion and over what timescale?

11. Have you directly increased your building programme as a result? - or speeded

up production? Can you estimate by how much and over what timescale?

12. Overall, would you have built more/fewer homes/different types of homes if it had

not existed?

13. In particular have you accelerated development on larger sites as a result of the

scheme?

14. Are there any constraints on your capacity to build - eg the 6 month exchange to

completion rule?

15. Are there any regional differences in your response to the scheme – is it helping

you build in more areas/larger sites/overall output?

16. What would you have done if this scheme had not existed?

Impact on the market

17. Has scheme participation increased confidence to expand?

131

18. Has the scheme raised the profile and appeal of new build over second hand

homes?

19. What do you think of the way the scheme is defined – (eg not just first time

buyers; up to £600,000 etc). How have these generous limits affected the

market?

20. Are there factors in the design that have driven participation?

21. How would you have defined the scheme?

22. Has the scheme changed builder/lender relationships in any way?

23. Has the scheme changed builder/investor relationships in any way?

The future

24. How do you see the importance of the scheme into the future - which parts of the

market does it help/or is it now not important

25. How important is the extension to 2020 for your future plans? - Has this extension

already changed decisions? Do you expect it to do so into the future? How?

26. Are you concerned that there may be further changes to the scheme - or even

withdrawal?

27. With respect to Help to Buy Equity Loan, what would you like to say to the new

Minister/Chancellor if you were able to meet him/her?

28. Do you anticipate any difficulties for the purchasers to move on –given they must

repay their equity loans?

132

Agents

1. Why did your organisation want to become/remain an agent?

2. How do you view the success of the scheme?

3. What proportion of purchasers come to you directly to obtain

information/understand what the Help to Buy Equity Loan scheme offers?

4. How would you describe your relationships with (i) the purchaser (ii) the builder

and (iii) the lender?

5. Is the 6 months rule on exchange to completion rule a constraint?

6. Do many purchasers fall out during the process?

7. What are the strengths and weaknesses of the marketing process?

8. What are the strengths and weaknesses of the sales process?

9. Do you have concerns about the targeting of the scheme? Have the fairly open

criteria helped draw in more households?

10. How does this compare with other similar schemes such as First Buy and New

Buy?

11. How well do you think households understand the finances of the scheme and

their future financial commitments?

133

A2.2 Household telephone interview survey

questionnaire

Ipsos MORI for Department for Communities and Local Government

Help to Buy Equity Loan Beneficiaries Survey

15-008507

FINAL2 – 07 May 2015

• Telephone survey with 500 beneficiaries of Help to Buy

• Targets set by first-time buyer status, broad geographic region and property size

• Average interview length of 15 mins

• Key objectives: contribute to demand-side additionality assessment, segment

beneficiaries and provide evidence on the perceived experiences of Help to Buy

process.

Survey introduction

Good morning / afternoon / evening.

My name is ………………and I am calling you from Ipsos MORI, the research organisation,

on behalf of the Department for Communities and Local Government.

Can I please speak to [insert name of resident from sample].

INTERVIEWER: If transferred to another person, repeat “My name is from Ipsos

MORI...the Department for Communities and Local Government”.

We are contacting you about some research we are conducting on the Help to Buy Equity

Loan Scheme and understand you have purchased a new build home using this scheme

since its introduction in April 2013. We would like to find out more about your views and

experiences of this scheme to understand how it has impacted on the housing market as

well as people’s actions and attitudes to buying a home.

We are contacting you for research purposes only, and any views you give will be treated

completely confidentially.

READ REASSURANCE ON CONFIDENTIALITY

I would like to assure you that any information you provide will be held in the strictest of

confidence and will be handled securely throughout the study. The research findings will not

identify you and no personal information will be shared with any third parties. Further,

helping with this study will never affect any contact you have with a government department

or agency, now or in the future.

Before we begin, I’d also like to inform you that Ipsos MORI is a member of the Market

Research Society.

134

QA. Are you available to discuss this briefly now? (Arrange a call back if

necessary – the interview takes around 15 minutes)

INTERVIEWER: Check with the caller they are the named person. If it is not [NAME]

code as 4 ‘No, not named person…’

ASK ALL // SC

1. Yes, [NAME], appropriate time CONTINUE TO SURVEY

2. Yes, [NAME], but need to call back MAKE APPOINTMENT

3. Yes, [NAME], but refused THANK & CLOSE

4. No, not named person [NAME] THANK & CLOSE

The survey is about the Help to Buy Equity Loan scheme which was introduced in

April 2013 and was designed to support potential buyers with limited deposits to buy

a new build property by helping access to mortgage finance. I’d like to begin by

asking you about your current and previous accommodation.

Current and previous accommodation

Q1. Can I confirm that <<HtB ADDRESS>> is the property that you bought with the

assistance of the Help to Buy Equity Loan scheme?

ASK ALL // SC

1. Yes GO TO Q2

2. No THANK & CLOSE

3. Don’t know THANK & CLOSE

Q2. Was this the first time you ever bought a property or had you bought another

property previously, either outright or with a mortgage?

ASK ALL // SC

1. Yes, this was the first time ever I bought a property

2. No, I had bought another property previously

3. Don’t know

Q3. Are you still living in this property or not?

ASK ALL // SC

1. Yes

2. No

3. Don’t know

135

Q4. When did you move into the property that you currently live in?

ASK ALL // RECORD MONTH AND YEAR // SOFT CHECK IF BEFORE APRIL

2013 // INTERVIEWER CODE MONTH AND YEAR

1. Don’t know

2. Refused

Q5. How would you describe the property you currently live in?

ASK IF Q3=2 // SC // READ OUT

1. Detached

2. Semi-detached

3. Terrace or end of terrace

4. Purpose-built flat

5. Converted flat

6. Other

7. Refused (DO NOT READ OUT)

Q6. Which one of these applies to the property you currently live in?

ASK IF Q3=2 // SC // READ OUT

1. It is being bought on a mortgage

2. It is owned outright

3. It is rented from a local authority

4. It is rented from a housing association

5. It is rented from a private landlord

6. Other

7. Refused (DO NOT READ OUT)

Q7. How many bedrooms does your current property have?

ASK IF Q3=2 // SC // READ OUT

1. One bedroom or bedsit

2. Two bedrooms

3. Three bedrooms

4. Four or more bedrooms

5. Don’t know (DO NOT READ OUT)

6. Refused (DO NOT READ OUT)

Q8. Is the current property you live in….?

ASK IF Q3=2 // SC // READ OUT

1. A newly built property (by which I mean you were the first to occupy it)

2. An existing property that had previously been occupied before you moved in

3. Something else

4. Don’t’ know (DO NOT READ OUT)

5. Refused (DO NOT READ OUT)

136

Q9. What was the main reason for moving away from <<HtB ADDRESS>>?

ASK IF Q3=2 // MC // DO NOT READ OUT PROBE FULLY

1. To move to cheaper property

2. To move to more expensive property

3. To move to a larger property

4. To move to smaller property

5. To move to different type of property

6. To move to a better quality property

7. To move to a better area

8. To move closer to family/ friends

9. To move closer to job

10. To move closer to schools for children

11. Change or loss of job

12. Family breakup

13. Other change in personal circumstances (eg health issue, giving care/

support)

14. Other (SPECIFY)

15. Don’t’ know

16. Refused

Previous accommodation

Q10. How would you describe the property you previously lived in immediately

before you moved into <<HtB ADDRESS>>?

ASK ALL // SC // READ OUT

1. I was living at home with parents

2. I was renting from a local authority/ housing association landlord

3. I was renting from a private landlord

4. I was living in a home that I owned outright without a mortgage

5. I was living in a home that I owned with a mortgage

6. Other

7. Don’t know/ refused (DO NOT READ OUT)

Preparing to move

Now thinking about the time before you moved into <<HtB ADDRESS>>….

Q11. When did you first start looking to move? By looking I mean searching and

viewing properties.

ASK ALL // RECORD MONTH AND YEAR // INTERVIEWER CODE MONTH AND

YEAR

1. Don’t know

2. Refused

137

Q12. When you first started to look to move, were you looking to buy or rent a

property?

ASK ALL // SC // PROBE FULLY

1. Buy - with a mortgage

2. Buy - outright without a mortgage

3. Rent - from a private landlord

4. Rent - from a social landlord (such as a council or housing association)

5. Rent - from someone else

6. Don’t know/ can’t remember (DO NOT READ OUT)

7. Refused (DO NOT READ OUT)

Q13. And when you first started to look to move, were you aware of the Help to

Buy Equity Loan scheme or not?

ASK ALL // SC

1. Yes

2. No

3. Don’t know (DO NOT READ OUT)

Q14a. Who was your main source of further information about the assistance

available through the Help to Buy Equity Loan scheme?

ASK ALL // SC // READ OUT

1. A house builder

2. A Help to Buy agent

3. Someone else (SPECIFY)

4. Don’t know (DO NOT READ OUT)

Q14b. Which of the following statements best describes who first made contact?

ASK ALL // SC // READ OUT

1. I first contacted them before they contacted me

2. They first contacted me before I contacted them

3. Don’t know/ can’t remember (DO NOT READ OUT)

Q15. When you first started to look to move, what was the total amount of savings

available to you to contribute to the deposit, including your partners’ savings if you

jointly applied for a mortgage? This may have been less than the total savings you

eventually used for the deposit for <<HtB ADDRESS>>.

ASK ALL // IF RESPONDENT DOES NOT KNOW THE EXACT AMOUNT, RECORD

THEIR ESTIMATED AMOUNT £

1. Don’t know

2. Refused

Q16. Up to the point when you first started to look to move, how long had you

(your partner) been saving for a deposit?

ASK ALL // SC // READ OUT

138

1. Less than six months

2. Between six months and a year

3. Between one and two years

4. Between two and three years

5. Between three and five years

6. Five years or more

7. Don’t know/ Can’t remember (DO NOT READ OUT)

8. Refused (DO NOT READ OUT)

Q17. Did you use any other sources of finance, such as a loan or ‘gift’ from the

family, to contribute towards the deposit when you bought <<HtB ADDRESS>>?

ASK ALL // SC // READ OUT

1. Yes

2. No

3. Don’t know (DO NOT READ OUT)

Impact of Help to Buy Equity Loan

Q18. To what extent do you agree or disagree with the following statements about

buying a property using the Help to Buy Equity Loan scheme?

ASK ALL // SC FOR EACH // READ OUT

a) I would have been able to buy a property I wanted anyway without this

assistance

b) I started looking for property to buy sooner than I otherwise would have

c) The time taken to buy the property was slower than it would have been

without this assistance

d) I would still have bought a newly-built property without this assistance

e) It enabled me to buy a property with a larger number of bedrooms than would

have been possible without this assistance

f) It enabled me to buy a property in a better area than would have been

possible without this assistance

g) I feel I am unable to move up the property ladder now

h) Buying a property using this assistance has been more beneficial for the

house builder than it has been for me

1. Strongly agree

2. Tend to agree

3. Neither agree nor disagree

4. Tend to disagree

5. Strongly disagree

6. Don’t know (DO NOT READ OUT)

Q19. At the time that you moved into <<HtB ADDRESS>>…

ASK ALL // SC FOR EACH STATEMENT // READ OUT // PROBE DEFINITELY OR

PROBABLY

139

a) … do you think you would have been able to buy this same property without

the assistance of the Help to Buy Equity Loan scheme or not?

b) …and do you think you would have been able to buy a similar property that

was NOT new build and being sold by its owner. By similar I mean in terms of

type, size and location?

1. Yes – Definitely

2. Yes – Probably

3. No – Probably not

4. No – Definitely not

5. Don’t know (DO NOT READ OUT)

Perceived experiences of the process

Q20. At the time when you bought <<HtB ADDRESS>>, how confident, if at all were

you with….?

ASK ALL // SC FOR EACH // READ OUT

a) Your ability to pay the mortgage repayments?

b) Being able to repay the equity loan element?

1. Very confident

2. Fairly confident

3. Not very confident

4. Not at all confident

5. Don’t know (DO NOT READ OUT)

6. Not applicable (DO NOT READ OUT)

Q21. And now, how confident, if at all are you with….?

ASK IF Q3=1 // SC FOR EACH // READ OUT

a) Your ability to pay the mortgage repayments?

b) Being able to repay the equity loan element?

1. Very confident

2. Fairly confident

3. Not very confident

4. Not at all confident

5. Don’t know (DO NOT READ OUT)

6. Not applicable (DO NOT READ OUT)

Q22. How much, if at all, do you think you fully understood your financial

commitment of the equity loan when you bought your property?

ASK ALL // SC // READ OUT

1. A great deal

140

2. A fair amount

3. Not very much

4. Not at all

5. Don’t know (DO NOT READ OUT)

Q23. Overall how satisfied or dissatisfied were you with the experience of buying a

property using the Help to Buy Equity Loan scheme?

ASK ALL // SC // READ OUT

1. Very satisfied

2. Fairly satisfied

3. Neither satisfied nor dissatisfied

4. Fairly dissatisfied

5. Very dissatisfied

6. Don’t know (DO NOT READ OUT)

Rating of the HtB property

Q24. Now thinking about the property you bought with the assistance of the Help to

Buy Equity Loan scheme and how it compared to the property you lived in

immediately before this, how much better or worse do you think <<HtB ADDRESS>>

is/ was in relation to the following, or is/ was there no difference?

ASK ALL // SC FOR EACH // READ OUT // ROTATE STATEMENTS

a) The quality of the property

b) The space you have within the property

c) The location of the property

1. Better

2. No difference

3. Worse

4. Don’t know (DO NOT READ OUT)

5. Not applicable (DO NOT READ OUT)

Future moving intentions

Q25. Which of the following statements best describes your current attitude to

moving to different property in the future?

ASK ALL // SC // READ OUT

1. I intend to move within the next year

2. I intend to move within the next 2 to 5 years

3. I do not intend to move within the next 5 years

4. Don’t know (DO NOT READ OUT)

Q26. Why do you intend to move?

ASK IF Q25=1 OR 2 // MC // DO NOT READ OUT PROBE FULLY

141

1. Can’t afford the mortgage payment

2. To move to smaller property

3. To move to larger property

4. To move to different type of property (eg house/ flat/ bungalow, specialist

sheltered/ supported)

5. Condition of current property poor

6. To move to a better area

7. To move closer to family/ friends

8. Job related reasons (eg closer to work, loss of job)

9. School related reasons (eg closer to school, better school catchment area)

10. Divorce or separation

11. Getting/ got married/ going to live with someone

12. Other change in personal circumstances (eg health issue, giving care/

support)

13. Other (SPECIFY)

14. Don’t’ know

15. Refused

Q27. Why do you not intend to move?

ASK IF Q25=3 // MC // DO NOT READ OUT PROBE FULLY

1. Current property suits needs

2. Condition of current property good

3. Like area currently live in

4. Too soon after last move

5. Can’t afford suitable property in the area want to live in

6. The overall cost of purchasing a property too high

7. Not a good time to sell property

8. Can’t find a mortgage lender willing to lend/ remortgage under this scheme

9. Repaying the Equity Loan in a rising market

10. Job related reasons (eg close to work, employment uncertainties)

11. School related reasons (eg close to school, better school catchment area)

12. Divorce or separation

13. Getting/ got married/ living with someone

14. Other change in personal circumstances (eg health issue, giving care/

support)

15. No particular reason

16. Other (SPECIFY)

17. Don’t’ know

18. Refused

Demographics

And lastly I’d like to ask some general questions about you. As with the rest of the

questionnaire, I would like to assure you that your answers are completely

confidential.

Q28. What was your age last birthday?

ASK ALL // SC // DO NOT READ OUT, CODE AS APPROPRIATE

142

1. 16-24

2. 25-34

3. 35-44

4. 45-54

5. 55-59

6. 60-64

7. 65+

8. Don’t know

9. Refused

Q29. How would you best describe your current work status?

ASK ALL // SC // DO NOT READ OUT, PROBE WHERE NECESSARY

1. Working full-time (30 hours a week or more)

2. Working part-time (less than 29 hours a week)

3. Self-employed

4. Unemployed – seeking work

5. Unemployed – not seeking work

6. Fully retired

7. Long term sick or disabled

8. Full-time education, training scheme/ apprenticeship

9. Other

10. Don’t know/ refused

Q30. What is the total number of people living in your household including yourself

and any children?

ASK ALL

INTERVIEWER TYPE IN NUMBER

1. Don’t know

2. Refused

Q31. How many dependent children are there living with you? That is those under

the age of 16 or those aged 16-18 unmarried and in full-time education.

ASK IF Q30>1

INTERVIEWER TYPE IN NUMBER

1. Don’t know

2. Refused

Q32. And how many couples are there living in your property? IF NECESSARY One

couple is two people in a relationship and living together.

ASK IF Q30>1 OR Q30-Q31>1

INTERVIEWER TYPE IN NUMBER

1. Don’t know

2. Refused

143

Data matching and final comments

Q33. As part of this research project, we would like to be able to match other

information captured during your application to this survey to conduct further

analysis. As before, all information will be used for research and statistical purposes

only. Your personal details will be kept completely confidential and will not be shared

with any third party.

Are you happy for Ipsos MORI, on behalf of Department for Communities and Local

Government, to add information about your Help to Buy application to your

responses to this survey?

ASK ALL // SC

1. Yes

2. No

Q34. Finally, are there any other comments you would like to make about the Help to

Buy policy or the process you went through?

ASK ALL

WRITE IN

None

THANK AND CLOSE

144

A3 Additional tables and references

Table A3.1: Developers with More than 20 Active Sites as of May 2015

Developer

Number of Active Sites

Taylor Wimpey

319

Persimmon

257

Barratt Homes

239

David Wilson Homes

168

Bellway

164

Redrow

126

Bovis Homes

102

Charles Church

101

Linden Homes

Miller Homes

Bloor

HA Keepmoat Homes

Crest Nicholson

Cala Homes

Wainhomes

Morris Homes

Gleeson Homes

Kier Homes

Berkeley Group Berkeley

Jones Homes

Stewart Milne Homes

Galliard Homes Ltd

Countryside Properties

Lovell Homes

Source: Esurv, unpublished data

145

Table A3.2: Quarterly Completions in Local Authority High Activity Areas

2010

2011

2012

2013

2014

2015

Aylesbury Vale

110

120

140

100

170

140

260

130

160

100

210

180

220

110

170

250

140

240

Bedford

130

110

130

110

130

120

170

100

110

100

140

120

160

120

160

140

170

180

220

Chorley

100

130

120

130

100

220

120

140

100

110

130

140

180

Corby

170

140

110

130

120

110

Dartford

130

100

150

120

140

100

130

Gloucester

140

110

100

110

120

110

100

120

130

140

Hinckley & Bosworth

120

100

140

120

150

130

250

160

260

180

250

Peterborough UA

100

140

130

190

140

120

130

150

190

110

150

130

140

150

South Norfolk

140

120

110

140

100

130

100

130

110

170

120

240

120

180

110

160

150

140

110

150

Telford and Wrekin UA

120

100

170

120

100

160

120

100

130

210

150

210

240

260

210

200

Source: Department for Communities and Local Government 2015d, Live Table 253a (data published 20 August 2015)

146

Figure A3.1: Annual Completions in Local Authority High Activity Areas

Source: Department for Communities and Local Government 2015d, Live Table 253a (data published 20 August 2015)

147

Table A3.3: Large developers activity 2012-2014 (source annual reports)

Number of homes

completed in period

Number of Help to Buy sales

No. of plots acquired

Current Land Bank

(plots/years to build out)

Developer

2012

2013

2014

2012

2013

2014

2012

2013

2014

2012

2013

2014

Barratt

12,637

13,246 14,191

N/A

(1,694

under

HomeBuy

Direct and

FirstBuy)

c. 530 c. 4,400 12,085 18,536 21,478

54,209

plots/4.3

years

57,654

plots/4.4

years

66,570

plots/4.7

years

Taylor

Wimpey

10,866

11,696 12,454

NA (1,749

NewBuy

and

FirstBuy)

2,928 (in

2013 in

total, not

financial

year)

4,400 14,172 18,770 17,371

65,409

plots/6.1

years in

short

term

land

bank;

strategic

landbank

includes

100,340

70,628

plots in

short

term

land

bank;

strategic

land

bank

includes

109,174

c. 75,000

plots in

short

term

land

bank;

strategic

land

bank

includes

c. 110k

Persimmon

9,903

11,528 13,509

N/A

(c.1980

NewBuy

and

FirstBuy)

2,203

4,374 (in

E; 984 in

W and S)

c. 14,800 11,447 26,822

68,200

plots/6.9

years

74,407

plots/7.2

years

87,720

plots/6.5

years

148

Bellway

5,226

5,652 6,851

N/A (446

NewBuy

up to 31

July 2012)

Not

Reported

c. 2,120 4,776 7,007 7,294

31,136

plots

32,991

plots

35,434

plots/5.2

years

Table A3.3 cont.: Large developers activity 2012-2014 (source annual reports)

Number of homes

completed in period

Number of Help to Buy sales

No. of plots acquired

Current Land Bank

(plots/years to build out)

Developer

2012

2013

2014

2012

2013

2014

2012

2013

2014

2012

2013

2014

Redrow

2,458

2,827 3,597

N/A (63

NewBuy)

82 1,023 4,100 4,729 6,092

12,356

plots in

current

land

bank;

22,800 in

forward

land bank

14,162

plots in

current

land

bank;

26,024 in

forward

land bank

16,724

plots in

current

land

bank;

28,250 in

forward

land bank

Bovis

2,355

2,813 3,635

N/A

(c. 185

NewBuy)

872 (all

sales to

customers

using

shared

equity

scheme,

including

Help to

Buy

Equity

Loan)

NA 3,501 3,737 7,300

13,776

plots in

consented

land bank;

19,318 in

strategic

land bank

9,197

plots in

consented

land bank;

20,108 in

strategic

land bank

18,062

plots in

consented

land bank/

c.5 years;

21,350 in

strategic

land bank

149

A3.1 References

Council of Mortgage Lenders Economics (2015) New Mortgages by Purpose of Loan,

England. Table ML1. Regulated Mortgage Survey [Online] Accessed 4 November

2015. Published 5 October 2015. http://www.cml.org.uk/industry-data/industry-

data-tables/

Department for Communities and Local Government (2015a) Live Table 253a. Permanent

dwellings completed, by house and flat, number of bedroom and tenure. Published

20 August 2015.

Department for Communities and Local Government (2015b) Help to Buy Equity Loan

Scheme, by post code sector (Total Equity Loans). Published 08 August 2015.

http://opendatacommunities.org/data/housing-market/help-to-buy/num-loans/loan-

type-postcode-sec

Department for Communities and Local Government (2015c) Help to Buy (Equity Loan

scheme) and Help to Buy: NewBuy statistics: Data to 30 June 2015, England.

Housing Market Statistical Release, Published 09 September 2015.

Department for Communities and Local Government (2015d) Permanent Dwellings Started

and Completed, by tenure and district. Live table 253a. Data published 20 August

2015.

Department for Communities and Local Government (2015e) House Building: Permanent

Dwellings started and Completed, by Tenure, England (quarterly). Live table 213.

Published 20 August 2015.

Esurv (2015) New Build Price Premium Data. Unpublished data provided by Charles

Smith.

Financial Policy Committee (2105) Record of the Financial Policy Committee meeting 23

September 2015, 1

October, London, Bank of England

Glenigan and Home Builders Federation (2015) New Housing Pipeline Q4 2014 report.

[Online] Accessed 13 June 2015.

http://www.hbf.co.uk/fileadmin/documents/research/Housing_pipeline_report_Q4_

2014_-_March_2015.pdf

Glenigan (2015) Planning Approvals and Starts in England.

http://www.hbf.co.uk/fileadmin/documents/research/HBF Housing Pipeline Report-

July 2015.pdf

Homes and Communities Agency (2015) Help to Buy Transaction Data to 30 June 2015

(unpublished), Accessed 26 October 2015.

Knight Frank (2015) Gaining Ground: Housebuilding Report 2015, Knight Frank,

Ipsos MORI (various years). Halifax Housing Market Confidence Tracker - Long Term

Trends. [Online] Accessed 18 June 2015. https://www.ipsos-

mori.com/researchpublications/researcharchive/3167/Halifax-Housing-Market-

Confidence-Tracker-Long-Term-Trends.aspx?view=wide

Land Registry (2015) Property sale transactions, English regions and Wales [Online].

Published by CML Economics. Published 29 September 2015.

Land Registry (Various years). Price Paid Data [Online] Accessed 17 October 2015.

http://landregistry.data.gov.uk/app/ppd/ppd

Lloyds Banking Group (2015) Building for Growth, Lloyds Bank Research Series:

Housebuilding, Lloyds Growth

Moneyfacts (various years) Moneyfacts Treasury Reports: UK Mortgage Trends

National Audit Office (2014) The Help to Buy equity loan scheme, HC 1099 session 2013-

14, 6 March 2014

150

National House-Building Council (2015) NHBC Annual New Home Statistics Review 2014.

[Online] Accessed 13 June 2015.

http://www.nhbc.co.uk/cms/publish/consumer/NewsandComment/Stats/Q4_2014.p

Office for National Statistics (2015a) House Price Index (HPI), Table 2, Mix Adjusted

Average House Prices by Region. Published 13 October 2015.

Office for National Statistics (2015b) House Price Index (HPI), Table 11, Simple average

house prices, by new/other dwellings, type of buyer and region, from 1992

(quarterly). Published 13 October 2015.

Office for National Statistics (2015c). Population Estimates for UK, England and Wales,

Scotland and Northern Ireland, Mid-2014. Published 25 June 2015.

Office for National Statistics (2015d) House Price Statistics for Small Areas, 1995 to 2014.

Published 24 June 2015.

Savills (2014a) What’s next for Residential Development? Spotlight, May, Savills, London

Savills (2014b) Counting the cost. What is the annual cost of housing in the UK?

Residential Property Focus Q3 2014, Savills, London

Shelter (2015) How much help is Help to Buy? Help to Buy and the impact on house prices

September, London, Shelter