Proposed initiative akin to Help to Buy would reduce deposit requirements and loan-to-value ratios for new-build homes
The Home Builders Federation (HBF) has again urged the government to introduce a new equity loan scheme to help first-time buyers get on the property ladder as it published figures showing affordability has worsened.
The findings of new research conducted by the membership body show that the gap between what aspiring homeowners can afford and the cost of actually purchasing a home has “widened significantly” in recent years.
Given that the average first-time buyer home costs around £240,000 but a typical buyer can borrow only around £148,000 based on standard income multiples, this leaves an affordability gap of nearly £70,000 after adding a 10% deposit.
In London, the affordability gap sits at £275,000 for average earners aged 22 to 29 and £220,000 for those aged 30 to 39.
The report also highlighted a drop in owner-occupier households from 71% in 2003 to 65% as of 2024 and from 41% to 30% for households with a mortgage. The findings in the report are based on a variety of ONS datasets and data from the English Housing Survey.
The HBF’s proposal would provide a 15% equity loan on new-build homes, funded through a combination of government support and a developer fee. By reducing deposit requirements and loan-to-value ratios, the scheme would aim to make mortgages more affordable.
The proposed initiative follows the 2022 closure of the Help to Buy scheme, which similarly allowed buyers to purchase new-build properties with a lower deposit and government support.
Neil Jefferson, chief executive of the HBF, said: “Without government intervention, home ownership will continue to fall and become the preserve of a smaller, older and wealthier group. Help to Buy demonstrated that well-designed equity loan schemes can support buyers, boost supply and deliver strong returns for taxpayers.
“A new, targeted first-time buyer equity loan scheme, part-funded by developers, would restore access to affordable mortgage finance, support new housing delivery, create jobs and growth and give a new generation a fair chance to get onto the housing ladder.”
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