Campaigners claim Help to Buy is more expensive than renting

First time buyers would be better off continuing to rent than taking out a 95% mortgage with the Help to Buy scheme, according to campaign group PricedOut.

The group accuses the government scheme of pressuring people into unaffordable debt. The second phase of the Help to Buy scheme, which launched at the beginning of October, offers a taxpayer-backed guarantee to lenders when they offer 90-95% mortgages through the scheme. It is designed to help first time buyers with smaller deposits to get on the property ladder, but it has drawn criticism from some.

PricedOut says that, according to their analysis, most people would be better off continuing to rent, while increasing their savings in order to access a better interest rate. They compared the average monthly cost of renting with the cost of repaying an average mortgage. Because interest rates can be higher on 90-95% mortgages, the campaign group found that it was cheaper in all regions to rent than get a mortgage through Help to Buy.

In London, the research found that a 95% loan at an interest rate of 4.99% would cost £1,437 per month (based on the average price of a typical first home), compared to average rents of £1,141. Although the gap was smaller in other areas of the country, renting still worked out cheaper.

A PricedOut spokesman, Dan Wilson Craw, said:

“The millions of us renting want to be able to buy our own home eventually but, with house prices too high, all David Cameron and George Osborne have offered us is a Ponzi scheme to pull the wool over our eyes and help inflate the value of their London property portfolios even further. Continuing to rent and save appears to be the better option for most tenants.

“Instead of showering us with debt, the government need to make the actual houses cheaper and the only way they can do that is to build more of them.”

Others argue that the priority should be getting people onto the property ladder, as a home provides security as well as being an asset that can grow in value over time.