UK Housebuilders Rise After Government Announces First-Time Buyer Equity Loan Scheme

Shares in UK housebuilders rose on Monday after the government announced plans for a state-backed equity loan scheme designed to reduce the deposit required by first-time buyers purchasing new-build homes in England.

The Ministry of Housing, Communities and Local Government said the scheme, called Your First Home, will be confirmed at next month’s Budget.

Under the proposed scheme, eligible first-time buyers will be able to purchase a new-build property with a deposit of 2.5%, supported by a government-backed equity loan covering 20% of the property value.

The property must be purchased from a developer participating in the scheme.

Housebuilder Shares Gain

Shares in several listed UK housebuilders advanced following the announcement.

Berkeley Group Holdings (LSE:BKG), Persimmon (LSE:PSN), Barratt Redrow (LSE:BTRW), Taylor Wimpey (LSE:TW.), Bellway (LSE:BWY), Vistry Group (LSE:VTY) and Crest Nicholson (LSE:CRST) recorded gains ranging from 3% to 14.5%.

The scheme is intended to reduce the upfront deposit required from qualifying first-time buyers and provide additional support for purchases in the new-build market.

Equity Loans to Include Interest-Free Period

The government said the equity loans will initially be interest-free. According to the government, this could allow participants to save hundreds of pounds per month compared with financing a purchase using a 95% mortgage.

Eligibility will be subject to a household income limit as well as local property price caps. Further details, including the applicable thresholds, are expected to be announced at the Budget.

Developers participating in Your First Home will also be expected to make a financial contribution towards the cost of operating the scheme.

Government Targets New-Build Housing Market

The government said the programme is intended to address the deposit requirements faced by prospective first-time buyers while also supporting demand for newly built properties.

It cited international economic pressures and higher construction costs among the factors affecting the new-build housing market.

The government expects the scheme to support housing demand and supply, although its eventual impact will depend on factors including eligibility criteria, developer participation and take-up among prospective buyers.

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