Help to Build prospectus published today shows users will not be subject to the restrictions recently introduced on Help to Buy
The long-awaited “Help to Build” equity loan scheme designed to assist self and custom builders looking to purchase a property will be set up along the lines of the original Help to Buy scheme, the government has confirmed.
A prospectus released by the housing department this morning setting out details of the £150m scheme made clear that the scheme will not be subject to the restrictions that have been applied to the mainstream Help to Buy equity loan scheme from April this year.
This means that users of the proposed Help to Build scheme will not have to be first time buyers to take advantage of the scheme, and will not be restricted to purchasing projects under the stringent regional price caps applied to Help to Buy.
Instead, potential users of Help to Build will be able to buy home-building projects worth up to £600k, with Help to Build providing an equity loan for up to 20% of the value of the project, rising to 40% in London.
The introduction of price caps and the first time buyer stipulation have seen the proportion of homes sold by housebuilders using Help to Buy drop sharply.
Andrew Baddeley-Chappell, chief executive of the self-build trade body NaCSBA, said: “It’s really positive that the scheme is based on the original Help to Buy scheme as launched, with no regional price caps and no requirement to be a first time buyer.
“This means that Help to Build will actually be the most beneficial government support available for home buyers in the market.”
The government said it expected that 2,000 self- and custom-build buyers could benefit from the scheme initially.
The announcement came as the government revealed the Darlington Building Society is the first mortgage lender to publicly support the new Help to Build scheme. While the original Help to Buy scheme required housebuilders to participate, this version requires mortgage lenders to sign up to it in order that agreements can be offered to potential self- or custom-builders.
Andrew Craddock, the chief executive of the Darlington Building Society, said he was “delighted” that the firm was to be one of the first lenders to offer Help to Build mortgages.
“Building sufficient homes to meet increasing demand remains a key challenge for our country and the Society views the introduction of Help To Build as an important step towards supporting the delivery of self and custom build housing at scale,” he said.
Baddeley-Chappell said he was “aware that there are lenders that expect and are planning to participate”, but that no other names had so far been made public. He said the point of prospectus launched today was to set out the scheme details in order that lenders had the information they needed to make a decision on participating.
Lending to self-builders is largely done through smaller building societies rather than the major high street lenders, given the complexity of the deals compared to lending on completed homes.
The Help to Build system is designed to give lenders the confidence they need to lend to people with deposits as small as 5%, on the basis those self-build loans can be converted into normal mortgages with the benefit of a 20% or 40% equity loan once the build is completed.
The findings of a government review of the law around self- and custom-building, commenced last year, are yet to be published, while the government is also still to formally respond to the Bacon Review of the self- and custom-build sector, commissioned by the prime minister, which reported in the summer.
Housing minister Christopher Pincher said the “ground-breaking” Help to Build scheme would make building a home “a realistic and affordable option”.
“This scheme will also support small housebuilders and create thousands of local jobs - providing a huge boost the self and custom build sector and delivering much-needed new homes,” he said.
This story was edited 26.11.21 to add the announcement of the Darlington as the first Help to Build lender