A mortgage lender has come up with its own version of the now defunct Help to Buy Equity Loan scheme.
Gen H has launched New Build Boost, which it describes as the first scheme since Help to Buy that targets buyers with small deposits and no access to family help.
It comes as figures show approximately 30,000 fewer households access new build homeownership each year since the end of the Help to Buy scheme.
Generation H said this has created a lost cohort of buyers with average incomes, small deposits, and no access to family financing.
The lender’s New Build Boost mortgage scheme is made of three parts and is used in partnership with select developers with Persimmon.
The buyer brings a minimum 5% deposit
They take out an 80% loan-to-Value (LTV) mortgage with Gen H.
The lender then closes the gap with a 15% interest-free boost supported by the house builder.
The structure of the boost mirrors Help to Buy – it is an equity loan, the value of which increases or decreases with changes in the house price.
But the boost is interest-free for its entire term, which can run for the full duration of the mortgage. This avoids the payment shock that Help to Buy customers encountered if they were unable to redeem their equity loan after the first five years.
The borrower also has the right to repay the boost (in whole or in part) at face value for the first five years. At the five-year mark, the value of the boost will step up or down to reflect changes in the property value to date. The amount to be repaid under the boost is capped at 2x the original amount to protect homeowners in the event of outsize house price growth.
The New Build Boost will be available on any plot at eligible sites from exclusive launch partners Persimmon. There are more than 120 participating sites across England for launch.
To benefit the widest possible audience, Gen H will be opening the scheme to all house builders to join, while also inviting other lenders to sign up to make their mortgage products available under the scheme.
Will Rice, chief executive of Gen H, said: “The housing crisis that our country faces can only be solved by building more new homes and ensuring that suitable financing solutions are available for people to buy them. We have designed New Build Boost to open up homeownership to a wider audience – especially those who are not fortunate enough to have access to family support – while also giving home builders the confidence to ramp up the delivery of new homes to market.
“We applaud the ambition and urgency shown by the Government to tackle the housing market’s structural problems. New Build Boost is our rallying cry to the private sector to raise its game and show that it too can be a part of the solution.”
Sonia Da Costa, chief customer experience officer at Persimmon Homes, added: “Given the ongoing challenge of affordability for many young families in particular, we are always looking for ways we can help make the dream of home ownership more accessible. We are delighted therefore to partner with Gen H to offer this opportunity to potential buyers, supporting them on their journey to new home ownership.”
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