Lloyds went back on its restrictions of the Help to Buy equity loan scheme in June this week, increasing its upper lending limit to £250,000 and its maximum purchase price to £600,000. It also opened up the scheme to homemovers as well as first-time buyers.
Currently the average user of the scheme takes out loans of £144,494 with a deposit of just £15,500 with the help of the government’s 20% contribution, worth just under £40,000.
Loans stand £105,500 below Lloyds’ average lending limits, while purchase prices average at £200,000, two thirds lower than the £600,000 limit.
Andy Frankish, new homes director at Mortgage Advice Bureau, said: “The fact that most buyers using the equity loan are content with purchases priced at just a third of the upper limit does not automatically mean the £600,000 ceiling should be reduced.
“The scheme has clearly been doing its job for the last 18 months without buyers taking unnecessary advantage of government support.
“Even though the majority of HTB1 customers are first time buyers, some flexibility is important so the scheme can perform to its full potential: not just by supporting people across the UK regions but also in a range of circumstances.
“This can include assisting those who bought their first homes near the peak of the housing market and suffered a loss of equity which is now limiting the deposit they can put towards their next move.”
In the first 18 months since the scheme coming into force 94% of loans were issued outside London.
Frankish added: “The news that one of the biggest names in UK banking has now renewed its commitment to the scheme will hopefully encourage more lenders to back the equity loan and improve the rates and options for consumers.”
