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We are sharing this update from ACCA, our professional body, for the interest of clients and contacts. The content is (c) ACCA

More relaxed mortgage lending rules will mean it is easier for first-time buyers to get on the property ladder in 2022, and private individuals who want to build their own new home in England look set to benefit from a new government ‘Help to Build’ equity loan scheme

The Bank of England proposes to abolish the rule that buyers must prove they could continue to meet their mortgage repayments even if their interest rate rose by 3%. This will make it easier for first-time buyers to get mortgages. It plans to consult with lenders and other stakeholders in early 2022.

For self-builders, a new government ‘Help to Build’ scheme aims to help:

  • first-time buyers wishing to self-build in England; or
  •  existing homeowners wishing to self-build a new home in England that will become their only home.

They must be able to provide a 5% deposit and obtain a self-build mortgage loan from a lender registered for the scheme. Under the scheme, individuals (not developers) can apply for an additional government loan, usually for a 25-year term, equal to 20% (if outside London) or 40% (if in London) of their land and building costs. Professional fees must be paid separately.

The total cost of the project must not be more than £600,000, and the cost of the new building itself (excluding the land) must not exceed £400,000.

For the first five years the loan is interest-free. Interest is then payable at 1.75% for the first year and rises in line with the Consumer Prices Index plus 2% in subsequent years.

The amount repayable to the government varies in line with changes to the value of the new build. If the new build’s value increases by 10%, so does the amount the homeowner must repay to the government. If it falls by 10%, the amount repayable falls by 10%.

Operative date

  • Now

Recommendation

  • Prospective homebuyers struggling to get a mortgage may wish to try again once a date is set for the new rules to come into force.
  • Private individuals wanting to build their own new home in England should check out and monitor the proposed new Help to Build scheme as the details emerge.