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From Monday 27 June the Help to Build equity loan scheme is open to applications. The government-backed scheme is designed to allow more people to build the homes that they want to live in, by giving them access to finance with a lower deposit of just 5% of the land and build costs.
Not only does this reflect government's ambition to bring choice and diversity to the market, but local authorities should be aware that this will open up the market.
Last year Prime Minister Boris Johnson said: “We know that self and custom build delivers high-quality, well-designed homes, that are energy efficient, accessible, affordable and welcomed by their communities”.
This new market will create more demand, which may be reflected in the Right to Build registers, and also creates a new demographic able to purchase plots.
The scheme comes with a series of requirements before applicants can access finance, but gives lenders the confidence to offer self build mortgages, knowing that the equity loan underpins some of the risk.
Originally announced in March 2021, the Help to Build equity loan scheme will democrtatise self build as a route to home owners, as the sector works to shake of the perception that the route is only viable for older, equity-rich people or Grand Designers.
Visit Help to Build for details of the scheme
Essentially, self builders can borrow an equity loan of between 5% and 20% (40% in London) of the estimated costs to purchase a plot and build a house. There is a cap of this of £600k altogether (or a max cap of 400k build costs if you already own the land) with different caps in London. To qualify, applicants need:
- deposit of at least 5% of the estimated costs
- 95% self build mortgage from a lender registered
with Help to Build (currently only Darlington Building Society) based on the estimated costs. - have outline planning permission
Custom and self build was, in the main, unable to access the Help to Buy scheme that boosted the new homes market, which Help to Build will help redress. Borrowers have to pay the loan back but it offers a way to get started for those blocked by deposits. However, as an equity loan the value you pay back depends on the cost of the home at the point of sale.
The National Custom and Self Build Association hopes that developers, land promoters and local authorities respond positively to the opportunity that Help to Build represents, working to bring forwards smaller, more accessible plots.
“Our home can protect us, it can inspire us, and it can sustain us and our community. It can make us healthier and fitter – mentally and physically, and it can enable us to live better lives,” says Andrew Baddeley-Chappell, NaCSBA CEO.
Building better
Research from NaCSBA’s recent Custom and Self Build Market Report showed that self builders build greener homes than those on the open market, with over half choosing a sustainable heating source and choosing to build with highly-efficient Modern Methods of Construction.
“Help to Build is important because it opens up custom and self-build as an option to those with smaller budgets and in particular smaller savings. Access to finance is just part of the answer. The key constraint is access to land with permission to build. This challenge is being addressed in part through the Right to Build legislation, which requires local authorities to ensure enough plots are permissioned to match the demand on the registers that they operate.
“However, some local authorities have been too slow to respond to the legislation, and it is important that they do more, not least to respond to the increased demand following the launch of this scheme. This is why the government’s response to the Bacon Review and the ongoing funding to the Right to Build Task Force are important pieces in a wider plan,” says Andrew Baddeley-Chappell, NaCSBA CEO.
Karen Curtin, managing director at Graven Hill, believes the Help to Build scheme was long overdue, saying: “The Help to Build scheme is a dream come true for many would-be self-builders, and we’re in full support of the initiative. With applications now open, the UK is finally moving in the right direction as we continue to revolutionise the housing market. Gone are the days of self and custom building being for the few – we are thrilled to see it become an option for the many.”