In his Autumn Statement, the Chancellor said the extension to the Help to Buy: Equity Loan scheme will allow Londoners to obtain an an interest-free equity loan from the government worth up to 40% of the value of a newly-built home. This compares to a 20% equity loan for anyone living outside London.
Help to Buy: Equity Loan, which has been extended to 2021, is open to first-time buyers and homemovers who want to purchase new build homes valued at a maximum price of £600,000.
The London version of the scheme means borrowers will need to contribute at least 5% of the property price as a deposit, the government will provide a loan for up to 40% of the price and the borrower will need a mortgage of up to 55% to cover the remaining balance.
The Chancellor said the government was choosing to build homes that people can buy.
“For there is a growing crisis of home ownership in our country. Fifteen years ago, around 60% of people under 35 owned their own home, next year it’s set to be just half of that,” he said.
The housing budget is set to be doubled to over £2bn a year which will help the government deliver 400,000 affordable new homes by the end of the decade.
He said almost half of these homes would be Starter Homes sold at 20% off the market value to young first-time buyers. Starter Homes are new-build homes ring fenced for first-time buyers under 40. The government plans to spend £2.3bn on 200,000 Starter Homes over the next five years. This money will be given to housebuilders to provide the 20% discount.
Some 135,000 of the government’s affordable homes will be sold under the new Help to Buy: Shared Ownership scheme.
It plans remove many of the restrictions on shared ownership relating to eligibility and who they can be sold to.
The new scheme lifts the current limits so that anyone who has a household income of less than £80,000 outside London, and £90,000 inside London, can buy a home through shared ownership. Military personnel are the only group which will be given be priority over other groups. The scheme will apply across England.
People can buy a share between 25% and 75% of a home. The rent on the rest of the property will not be more than 3% of the amount left.
The Department for Communities and Local Government gave the example of a house worth £227,000 where the buyer has bought a 40% share, the rent won’t be more than 3% of the remaining 60% – in this case £4,000 a year, or £340 a month.
