Although it has faced a raft of criticism since its launch, the government's Help to Buy Scheme has got off to a strong start. The programme is comprised of a mortgage guarantee option and an equity loan component. While the former isn't due to begin until January 2014, equity loans came into effect on April 1st and in the first two months 4,000 reserved a new home under the scheme.
Developers have also committed to increase supply, but with demand high, the Home Builders Federation claims the industry will need to significantly increase its output. Already there are 400 builders across the country registered for the scheme and there are around 500 Britons each week signing up for the equity loan.
The loan enables purchasers of new build homes to secure a mortgage with at least a five per cent deposit by granting an equity loan of 20 per cent. This is designed to work as a means to remove the barrier of a large deposit, while stimulating construction. The Equity Loan scheme is allied to the industry's NewBuy policy, which has also had over 4,500 reservations. With buyers only requiring a 75 per cent first-charge mortgage with an equity loan, homes are now very affordable.
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 4,000 reservations in just two months shows both the consumer demand for the scheme and developers’ commitment to it." He added that the scheme will "undoubtedly lead to an increase in house building", which has positive ramifications for the property market and the economy at large.
House building levels in England are currently around half of what they need to be to meet the formation of new households targets. Last year, just 88,000 private homes for sale were built and since 2007, output dropped to levels not experienced since the 1920s.
- Wednesday 12 June 2013