First-time buyers on the lookout for a new home may find it cheaper to simply avoid using the government’s Help to Buy Equity Loan scheme, according to a survey by price comparison site ReallyMoving.

A first-time buyer using Help to Buy would find themselves paying an average of £303,000 in February 2019 on a new home, compared to £270,000 for a first-time buyer not relying on the scheme.

This disparity results from first-time buyers having had to pay an average premium of 12 per cent when making purchases through the scheme in February 2019, when compared to first-time buyers who never joined the scheme.

Help to Buy is typically sought after by first-time buyers as a means to help them get a foot on the housing ladder, but strong demand for the scheme could actually be making it more costly, and the research raises the question of whether or not developers are charging higher prices on homes enlisted in the scheme.

First-time buyers dominate

ReallyMoving revealed this extra cost, after the government reported that it estimated Help to Buy had helped as many as 400,000 people onto the housing ladder.

First-time buyers were estimated to have accounted for as much as 57 per cent of total homebuyer activity in the UK in early 2019, according to ReallyMoving.

During this period of first-time buyer dominance, the Help to Buy Equity Loan premium also reached a record high, rising from just 7 per cent in August 2018 to an average of 12 per cent by February 2019.

As many as 18 per cent of first-time buyers expressed the intention of building an entirely new home instead of seeking a pre-existing or second-hand one, according to ReallyMoving.

Possible problems selling

Rob Houghton, CEO of ReallyMoving, said: “Help to Buy is indeed helping first-time buyers get onto the housing ladder, but these figures suggest that they may be paying more than the property is worth in order to get the help they need to raise a deposit.”

Explaining the added costs associated with the scheme, he claimed: “This could be either because developers are charging a premium or because first-time buyers are encouraged to buy a more expensive property because the scheme gives them greater spending power.”

Houghton acknowledged that first-time buyers resorting to the scheme could find potential problems when finally deciding to sell, saying: “They may find their property is worth less than they paid for it, made worse by the fact that they could be competing with new developments nearby that are available with Help to Buy, while their own property is no longer ‘new’ and therefore ineligible for the scheme.”