UK housebuilders have seen their share prices surge following a new equity loan scheme to support first-time buyers announced by the government.
Prime minister Andy Burnham’s version of Help to Buy, dubbed Your First Home, is expected to support deposits of 2.5%, backed by 20% government equity loans. This will be available for first-time buyers in England purchasing a new-build home from a developer that has signed up to the scheme.
The government said buyers would be able to access the loans with an initial interest-free period, meaning those using the scheme “could save hundreds of pounds per month compared with a 95% mortgage”.
Developers will also be expected to make contributions when signing up to the scheme to help cover the costs. This follows discussion about a potential return of George Osborne’s Help to Buy loan scheme, which enabled first-time buyers to access mortgages on a 5% deposit and ended in 2023.
Housebuilders have welcomed the move, with many seeing their share prices jump following the policy announcement.
Barratt Redrow and Bellway have both seen shares jump by over 12%, Persimmon by over 15%, Taylor Wimpey by over 11%, while trouble-hit Vistry has seen more than a 10% rise.
Oli Creasey, head of property research at Quilter Cheviot, said the UK’s beleaguered housebuilders were “likely to benefit” from Your First Home, adding that Persimmon’s shareholders enjoyed 300% returns over the same five year period from 2013-2018.
Creasey said the scheme is “likely to have a significant impact on the property sector and housebuilding in particular, although the precise level of impact will depend on the details, due to be announced in the October budget”.
“The announcement is likely to have a positive effect on house prices, boosting demand and injecting capital into the system.”
Barratt Redrow chief executive Dean Banks welcomed the news “and its recognition that more needs to be done to help first-time buyers into home ownership”.
“A well-designed equity loan scheme will help young people to take that first step on the housing ladder while giving housebuilders greater confidence to invest in building more new homes. It’s now vital that Your First Home is introduced as soon as possible and we look forward to working with government on the detail to make this a successful and effective scheme.”
Paul Rickard, chief executive at Pocket Living, added that the scheme “will be very welcome news for would-be first-time buyers desperate to get on to the housing ladder, and a lower 2.5% deposit could make the scheme even more accessible than Help to Buy”.
“It is also welcome relief for a housebuilding industry that has been reeling from the rising costs of construction, interest rates and new regulation.
Angus Irvine, partner and head of property consultant Rapleys Living, added: “This has been brewing for some time, with both national and regional housebuilders making representations to Government about the need for meaningful support for first-time buyers and the new-build market.
“The devil will inevitably be in the detail, which we will get in the budget we understand, but in principle this is a positive move. Quite frankly, the Government needed to do something to inject some energy back into the sector.”
Further details about how the scheme will work, as well as cost and implantation timelines, will be unveiled during the Budget announcement on 28 October.
