The government has launched a new equity loan scheme for the self-build market.
The Help to Build scheme aims to help thousands of people in England onto the property ladder by backing 95% loan-to-value mortgages for them to build their own homes.
Backed by £150m of government funding, the Department for Levelling Up, Housing and Communities said Help to Build will enable people to overcome prohibitive mortgage costs to build a home with just a 5% deposit – assuming they can find land and get planning permission.
It follows an independent review by MP for south Norfolk Richard Bacon into scaling up self and custom housebuilding, which suggests how the sector could deliver 30,000-40,000 new homes a year.
He said: “Making it easier for people to build or commission their own homes helps to promote a more diverse housing market with more real choice and control for consumers.
“There is clear evidence that getting people more involved in decisions about housing helps to deliver houses that are better designed and better built, which are greener and cost less to run and which communities are happier to see built. I look forward to working with the government to progress this important agenda.”
Housing Minister Stuart Andrew added: “Through the Help to Build scheme we will help thousands more people onto the property ladder by giving them the opportunity to build homes that are perfectly tailored to their needs and in the communities they want to live in.
“This innovative scheme will build on our work to break down the barriers to homeownership, as well as creating new jobs, supporting the construction industry and kickstarting a self and custom build revolution.”
Applicants will be able to borrow between 5% and 20% of their costs across England – and up to 40% in London through a government equity loan.
Total build costs cannot be over £600,000, or £400,000 if the land is already owned, and applicants must live in the property as a primary home.
Borrowers will have three years to build their home and will need outline planning permission before getting the government and bank funding.
Similar to the Help to Buy scheme, the equity loan is interest-free for the first five years but charges will apply from year six.
Interest will be 1.75% of the equity loan amount borrowed and increases in April each year by the Consumer Prices Index plus 2%.
Andrew Craddock, chief executive of Darlington Building Society – the first participant in the scheme- said: “Self-build isn’t the preserve of the wealthy, and Help to Build makes it more practical and accessible than ever before for people to build their dream home.
“This scheme also opens up the opportunities to first-time buyers. It is a fantastic example of the market moving with the times, and people’s changing wants and needs.”