The government has pledged to invest a further £10bn in the Help to Buy equity loan scheme in response to its ongoing popularity with homebuyers.
The extra funding means the initiative, which enables people to buy a new build home with only a 5 per cent deposit, could help around 135,000 more people onto the property ladder by 2021.
Since its launch in April 2013, the Help to Buy equity loan has resulted in 130,000 completions, with 81 per cent of purchases made by first-time buyers.
Under the terms of the scheme, the government provides an equity loan of up to 20 per cent of the purchase price (40 per cent in London), which is repaid when the home is sold or after 25 years - whichever comes first.
Prospective homeowners using the programme are subject to the normal affordability assessments undertaken by mortgage lenders, and no interest or repayments are due during the first five years of the loan.
The government claims the scheme has been instrumental in helping people onto the property ladder and will be accompanied by measures to boost housebuilding.
But it has also attracted criticism from some quarters, with many claiming it is fuelling a house price bubble that will eventually burst and leave people with negative equity.
Craig Hall, new build manager at Legal & General Mortgage Club, said: “It is very welcoming news that the government has announced an additional £10bn of funding for the Help to Buy scheme.
“Following last week’s Help to Buy figures being released, this is recognition of the fundamental role the scheme has played, particularly in helping first-time buyers onto the housing ladder, with an estimated 228,000 people using the scheme and a 52 per cent increase in net supply.
“It is interesting to note that the government has specified this funding is largely aimed at first-time buyers, this could be an early sign of intent for potential changes to the scheme.
“Although this funding will be reassuring for developers and lenders, we are still to receive the full detail on the funding and eligibility which is crucial for long-term planning.
"With further announcements likely to be made at the Autumn Budget, this is good early indication from the government of their intent to help thousands more to secure the chance of homeownership.”
simon.allin@ft.com
