Around 4000 people have reserved a new home using the Equity Loan part of the Government’s flagship Help to Buy scheme in just two months.
The Equity Loan scheme, launched on April 1, has already seen developers committing to increasing supply, but with the scale of demand for the scheme now becoming apparent, it is clear the industry will be able to significantly increase output.
The Help to Buy scheme has two parts to it. The Mortgage Guarantee element is due to start next January and is aimed at stimulating the whole housing market.
In the meantime, the Equity Loan part – under which Government helps the purchasers of new build homes secure a mortgage with at least a 5% deposit by granting an equity loan of up to 20% – has got off to a “flying” start. There are now more than 400 builders across the country registered for the scheme.
Interest has been huge and there are now on average around 500 people a week taking advantage of the scheme. Large deposit requirements have been the biggest barrier to people’s ability to buy, and thus builder’s ability to build. The Equity Loan scheme – allied to the industry’s NewBuy scheme that has had over 4500 reservations – means people can get onto or up the property ladder with a 5% deposit. And because buyers only require a 75% first-charge mortgage under the Equity Loan scheme, homes are very affordable.
House building levels in England are currently around half (115k p/a) those needed to meet the formation of new households(220k p/a)1. Just 88k private for sale homes were built last year. Since 2007 output has dipped to levels not seen since the 1920s, with the resultant social and economic implications. But with effective measures now in place to support demand, and consumer interest increasing, the industry is confident supply can be increased.
Stewart Baseley, Executive Chairman at the Home Builders Federation said: “The Equity Loan part of Help to Buy has got off to a flying start. It has been an unqualified success so far and 4000 reservations in just two months show both the consumer demand for the scheme and developers’ commitment to it.
“The large deposits required in recent years to secure a mortgage have prevented many from buying – and as a result, builders from building. The Equity Loan scheme helps consumers overcome that deposit barrier and as a result the scheme will undoubtedly lead to an increase in house building – already we are seeing companies revise their projected build levels as a direct result of the scheme. This in turn will create jobs and deliver an economic boost.”
Have your say on this story using the comment section below