Housebuilders welcome new equity loan scheme for first-time buyers but wait on detail

The housebuilding industry has welcomed the prime minister’s announcement of a new equity loan scheme for first time buyers.

Andy Burnham over the weekend announced Your First Home, which is expected to support 2.5% deposits, backed by 20% government-backed equity loans for prospective buyers purchasing a new build property from a developer signed up to the scheme.

Buyers will be able to access the equity loans with an initial interest free period, which government said would allow buyers to save hundreds of pounds per month compared to a 95% mortgage. Developers will be expected to make a contribution when signing up to the scheme to help cover costs.

The scheme will also set a household income cap, with local property price caps, to ensure it is targeted at those on lower incomes. The full details of these caps, along with the implementation timelines and costs won’t be confirmed until the Budget on 28 October.

A spokesperson for the Home Builders Federation said it welcomed the announcement and the government’s “recognition of the significant challenges facing first-time buyers and the wider housing market”.

He added: “We have been calling for action to improve access to home ownership, and a well-designed scheme has the potential to make a real difference to households who are struggling to get onto the housing ladder.”

But he warned: “It is important that it works for buyers across different parts of the country and for housebuilders of all sizes, while supporting the government’s wider ambition to increase housing delivery.”

This was echoed by Katy Davis, national head of planning at consultancy Carter Jonas.

She said: “The test will be whether the scheme reflects the very different markets across England. If local price caps are set too low, buyers could find there are few suitable homes they can actually purchase with it.”

Rebecca Wilson, head of residential new homes at Bidwells, Cambridge, said: “The affordability question will also be critical. Property price caps could make a real difference in some areas, but they will not make every market affordable, and the scheme cannot be expected to kick start every part of the country in the same way.

Paul Rickard, chief executive of developer Pocket Living said: “The scheme is rightly targeted to those that need it most and we need to ensure the links to local property prices mean this works in the unique London market where home ownership has been most challenged and where the demand for homes is highest.”

And Adam Bovingdon, managing director, real estate finance at lender United Trust Bank said: “The detail will matter. Income caps, local price caps and eligibility criteria are understandable, but if they become too restrictive there is a risk of limiting the scheme’s impact.”