Details of the scheme remain scarce and lender participation is widely unknown, but it is now understood that the government will release £100m of funding per financial year for next five years.
The scheme will initially be operated by Link Group/Link Housing, the operator for the last shared equity scheme – which ran from December 2019 to March 2021 – until the procurement process for a new operator is completed.
Unlike the past scheme – which allowed first-time buyers to apply for deposit support of up to £25,000 – this time around, borrowers are limited to £10,000, which can be used to purchase a new-build or second-hand property up to value of £300,000. No interest is payable; instead, the value of the loan to repay depends on the value of the home when it is sold.
The scheme is widely viewed as a positive for Scotland’s first-time buyers, even with a reduced loan amount – but only those who are close to reaching their deposit savings goal or have parental help are expected to benefit.
Jack Wilson, new build director at Mortgage Advice Bureau (MAB) Network Partner, said: “Everyone in the industry appreciates how difficult it is for first-time buyers to build a deposit, especially if they are paying high rent, so this should go a long way to addressing this challenge.
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“I do think only time will tell how impactful the sum of £10,000 will be in practical terms. We may find this reduces the pressures on the Bank of Mum and Dad, for example, rather than helping those who wouldn’t otherwise be in a position to buy. On the flip side, the lower amount means the funding will help more people, so that’s a big positive.”
Craig Fairfoull, group director at housebuilder Dundas Estates, said there is “huge pent-up demand” among first-time buyers, who have historically represented 40% of all new-build sales.
He said: “They have been waiting on something like this to unlock the final hurdle to get on the ladder. I expect there to be a big uptake as soon as more details are released.”
First come, first served
Fairfoull said this did raise the question of how long this year’s pot of cash would last for.
He added that it was a positive for those buyers for whom homeownership was almost within reach but were a few thousand pounds short of achieving their goal, but the government and lenders must play their part in allocating funds quickly.
“Lenders will have a big part to play in making sure that somebody who is hoping to benefit from this fund can actually do so in a timely fashion before the cash disappears,” he added.
But lenders, said Fairfoull, are adopting a ‘wait-and-see’ attitude – holding back their plans until full details of the practicalities and criteria are released by the government.
Wilson said: “Like all mortgage brokers, I’m sure, we eagerly await further detail regarding which lenders will be supporting the scheme, what their individual criteria will be and how the application process will work.”
The fund will be open to applications before the end of June, according to the government’s website.
