Equity Loan Mortgage Lenders

Assistance in the purchase of equity loan programmes: England, London, Scotland and Wales

State-sponsored equity loan programmes are available in England, Scotland and Wales under the Help to Buy (HTB) name. While there are differences between the rules, the overall stance to assist qualifying purchasers in purchasing their new building is the same. As part of the programmes in England outside Greater London and Wales, state investment trusts make available an equity loan of up to 20% of the value of the real estate to be repaid when the house is purchased.

The purchasers pay the other 80% through a 5% margin together with a mortgage to cover the rest of the sale amount. Under the London Help-to-Buy programme previously heralded in the Autumn Declaration 2015, state funding could make available an equity loan of up to 40% of the value of the real estate to be repaid when the house is disposed of.

The buyer contributes the other 60% through a 5% margin together with a mortgage to balance the rest of the sale. London's Help-to-Buy programme, which started on 1 February 2016, and more information about the system are available on the government's Help-to-Buy website. Scotland's Help-to-Buy (Scotland) Affordable Newbuild schemes, which will come into effect on March 1, 2016, include an equity loan of up to 15% of the value of the home to be repaid when the house is purchased.

Scotland's new regime provides for a reduced upper limit. These arrangements provide for higher LTV credits (Loan to Value) for new and established purchasers whose contributions are increased by the equity capital loan granted. Limits on the object prices are maximum: Housing must be the only real estate in which the purchaser has a vested interest and the purchaser must be resident in the UK.

These plans are temporary. They will run until 2021 in England (including Greater London) and Wales. Scotland is extending the regime until 2019. For more information on LIFT systems, please visit our low-cost homes page. In Northern Ireland there is no equal system, although the co-ownership programme encourages an accessible home buying through some kind of equity participation.

The Chancellor on 29 September 2016 proclaimed the end of assistance to purchase the mortgage bond from 31 December 2016. Others purchase aid issues, such as the HTB Equity Loan and HTB ISA, remained open to the deal and are not affected by the announcement of the closing of the mortgage protection component of the system.

The HTB Equity Loan in England continues to run until 2021. Our aim is to maintain a uniform stance on structures, operations and standardised documents as far as possible. The decisive factor for the lenders' involvement is the condition that the secondary equity loan can only mature after the first mortgage has expired.

It will ensure that lenders, when evaluating the affordability of the principal mortgage, do not have to take into consideration how the equity loan is paid back and it will also avoid mortgage behaviour regulatory questions. Our aim is the early elaboration of exits strategy for the present systems. It is our wish that government should cooperate with the CML and lenders in the early stages of successor plans.

It will help to make sure that all succession models can find adequate involvement of lenders and that there is a seamless transfer without "cliff edges" that could lead to unstable markets. The HTB equity loan programmes are guiding instruments to assist the new construction and low deposits loan markets. These programmes are of the highest political calibre. Lenders' demand for new buildings may be affected by evaluation problems and client practice.

The Help to Buy Equity Loan (HTBEL) program requires the developer to enter into an investment agreement that includes compliance with the Consumer Code of Conduct for building owners. It offers lenders a certain level of convenience. HTBEL's dominant position in the mortgage loan business means that some lenders may be close to their own risk thresholds for new building loans.

Scope for supporting other new construction activities, such as joint tenure, may be restricted, where the federal authorities want more lending activities to help buy 135,000 new share-owning houses heralded in the 2015 Autumn Declaration. It has the possibility of misaligning governments' expectation for more new construction activities with restricted lenders' appetites or capacities for them.

To overcome this situation requires other lenders to raise our slice of the pie, new companies to join the crowd, and changes in the way we do things through our brokers canals. As part of the government's Starter Homes program, clients can use a help-to-buy equity loan to buy a home under this program.

CML works with the Department for Communities and local Government, which develops the details for Starter Homes to create greater recognition and understand the challenge for lenders and clients when programmes and incentives are combined.