Weston Homes proposes new first time buyer equity loan scheme

Weston Homes has published a proposal for a new first time buyer equity loan scheme which it said could lead to 14,000 extra first time buyer sales while being interest-free for buyers and cost neutral for the taxpayer.

The £157m-turnover, Essex-based housebuilder is calling on ministers to adopt its “loan to own” scheme, under which government offers first-time buyers an equity loan of 20% of the property value.

The housing developer would pay the 5% annual interest for the first five years, meaning there is no interest cost on the mortgage for the homebuyer.

After five years buyers either refinance the equity portion or pay what Weston describes as “a modest, RPI-linked interest rate” on the outstanding amount.

The revenue from the interest payments after five years would be repayable to the treasury along with any equity value increase when the property is sold, which would make it nil cost or profitable for the taxpayer, Weston said.

Weston, in a paper produced with consultancy TYI Strategy, estimates that the model would help an extra 14,000 first time buyers on to the housing ladder each year, based on the assumption take up is similar to Help to Buy.

The paper also estimates savings to the homebuyer of approximately £500 per month based on mortgage payments on a 30-year, 75% mortgage, compared to a 95% mortgage.

Bob Weston, chair of Weston Homes, said: “Every week, we meet young people who want to buy a home but simply cannot make the numbers work.

“The market is stagnant. Housebuilders need buyers and a more a buoyant market if they are to build at the levels this government needs to hit its admirable housing targets. Restoring market liquidity is not simply a social objective, it is a delivery imperative.”

Weston last year announced it was setting up a new partnership division to enable it to move into build-to-rent and other living sectors in a bid to reduce its exposure to the sales market.