The Help to Buy equity loan is an instant hit, with almost 7,000 reservations in the first 3 months, Housing Minister Mark Prisk said today.
Since its launch in this year’s Budget, thousands of prospective homebuyers have been seizing the opportunity to buy a new-build home with just a fraction of the normal deposit, and over 1,000 sales have already been completed.
Under the scheme buyers receive a 20% equity loan, interest free for 5 years, which helps them buy a new build property from a participating housebuilder with a value of up to a £600,000.
By extending support to existing homeowners as well as first time buyers, the scheme is helping to remove a bottleneck in the market where homeowners want to move, but may be struggling to raise a large enough deposit to purchase their next property.
Mr Prisk said the success of the Help to Buy equity loan was delivering a surge of business to housebuilders, and showed the huge appetite and pent up demand for homeownership among the public.
Housing Minister Mark Prisk said:
With almost 7,000 reservations in 3 months, it’s crystal clear that the Help to Buy equity loan has captured the public’s imagination and is getting Britain building again, which will help achieve a long-term, stable housing market.
So any credit-worthy buyer, whether a first-time buyer or someone looking to move up the property ladder, should contact their local Help to Buy agent and see if they could benefit from the scheme.
Future roll out of Help to Buy programme
The Help to Buy equity loan will help up to 74,000 homebuyers over next 3 years. That represents 2% of the 3.4 million property transactions that the Office for Budget Responsibility estimates will take place over the same period, so it is unlikely the scheme will have any material effect on house prices.
The Help to Buy mortgage guarantee, which will be administered by the Treasury and begin in January 2014, will enable lenders to use government-backed guarantees to offer £130 billion worth of mortgages with smaller deposits, as little as 5%, on new and existing properties.
Where properties are bought under this option, the government will provide security for the loan, so if the house is then sold for less than the outstanding mortgage total the lender will be able to recover its loss.