In just two months of operation, there have been 4,000 new home reservations and confidence among the builders is high.
The equity loan scheme, launched on 1 April, has already seen developers committing to increasing supply, but with the scale of demand for the scheme now becoming apparent, the industry is looking to increase output significantly.
The Help to Buy scheme has two parts to it. The mortgage guarantee element is due to start next January and is aimed at stimulating the whole housing market. In the meantime, the equity loan part – under which government helps the purchasers of new build homes secure a mortgage with at least a 5% deposit by granting an equity loan of up to 20% – has got off to a ‘flying’ start, according to the Home Builders Federation (HBF). There are now more than 400 builders across the country registered for the scheme.
On average around 500 people a week taking advantage of the scheme. Large deposit requirements have been the biggest barrier to people’s ability to buy, and thus builder’s ability to build, the HBF said. The equity loan scheme – allied to the industry’s NewBuy scheme that has had more than 4,500 reservations – means people can get onto or up the property ladder with a 5% deposit. And because buyers only require a 75% first-charge mortgage under the equity loan scheme, homes have become more affordable to more people.
At 115,000 units a year, house-building levels in England are currently around half the 220,000 a year that market analysts believe are needed to meet the formation of new households.
Just 88,000 private for-sale homes were built last year.
HBF executive chairman Stewart Baseley said: “The equity loan part of Help to Buy has got off to a flying start. It has been an unqualified success so far and 4,000 reservations in just two months shows both the consumer demand for the scheme and developers’ commitment to it.
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“The large deposits required in recent years to secure a mortgage have prevented many from buying – and as a result, builders from building. The equity loan scheme helps consumers overcome that deposit barrier and as a result the scheme will undoubtedly lead to an increase in house building - already we are seeing companies revise their projected build levels as a direct result of the scheme. This in turn will create jobs and deliver an economic boost.”
Barratt chief executive Mark Clare said: “Customer interest in the Help to Buy scheme has been very strong as it addresses the issue of lack mortgage finance at higher loan to values. Interest has been particularly encouraging from customers previously locked out of the market by high deposit requirements. Post the Budget announcement, compared with last year, we saw reservations step up 18% and visits to the Barratt website increase by around 30%. Our production will rise to meet higher levels of demand and it's likely that our completions this year will be up 20% on 2 years ago. We are investing in land and bringing it through planning too and we are also expanding the business by taking on 600 new apprentices and graduates to tackle the skills shortage that could constrain future growth.”
Persimmon group chief executive Jeff Fairburn said: “Since the introduction of the Help to Buy measures in April we’ve seen a notable increase in customer interest and visitors to our sites, resulting in a stronger level of sales reservations across England. In response we have increased our build activity to meet this increase in demand. If this early interest is maintained, the Help to Buy Scheme will play an important role in enabling the industry to increase the volume of new homes built over the coming months and years. And in addition to helping the housing shortage this will have wider benefits for jobs and the economy – for example Persimmon has already decided to make significant further investment in trade apprentices this year to support the anticipated increase in output”
Taylor Wimpey chief executive Pete Redfern said: “It enables us to build more homes on the sites we have already got open, and also gives us more confidence about investing in future sites and infrastructure which creates more jobs and economic activity locally.”
CBI head of housing policy Lucy Thornycroft added: “These are early signs of a pickup in the housing industry – but we are still falling woefully short of building the homes we need. Housing stimulates quick economic returns - it has short construction lead-in times and immediate impact in creating jobs and boosting local economies.
“Ministers have been bold in introducing new measures helping people get a mortgage to meet pent-up demand. We now need to see real urgency to boost housing supply and affordable housing to stabilise the market in the longer-term.”
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