CML news & views

We welcome the announcement by the Housing Corporation (HC) of further details of the new HomeBuy Direct product.

HomeBuy Direct will be offered on selected new-build schemes following an assessment of bids from developers. Buyers on these schemes will be offered an equity loan of up to 30% of the purchase price. The equity loan will be jointly funded by the government and the developer. The maximum property price that will be considered for HomeBuy Direct is £300,000.

Purchasers will be required to raise their own funding, (including a mortgage, plus any deposit where available) of at least 70% of the purchase price. The lender will have first charge over the whole property. The equity loans are secured as second charges on the property and are on an equal footing between the HC and developers. Each equity loan charge will be 25 years.

Valuations will be carried out by an independent valuer on the basis of market value with vacant possession. Incentives are excluded from the assessment of the market value and developers will be required to use the new CML disclosure of incentives form to ensure transparency.

For the first five years, the buyer pays no interest. At the start of year six, a low equity charge is levied of 1.75% rising in line with the retail price index (RPI), plus 1% a year.

Eligibility will be the same as for other HomeBuy schemes (ie, households with an income of less than £60,000 which could not otherwise afford to buy a suitable property on the open market without help).  Priority will be given to social tenants and key workers.

Applicants will be required to undergo an eligibility check with one of the 23 HomeBuy agents (housing associations specialising in low-cost home-ownership) to ensure they qualify for the scheme. HomeBuy agents will also carry out an initial affordability assessment of applicants. Applicants will be encouraged to seek independent financial advice.

The HC is seeking bids including a good mix of one-, two- and three-bedroom properties on each site or scheme. They are also looking for properties that offer good environmental and space standards.

Developers have until 7 November to submit bids. Confirmation of successful bids will be made on 12 December with the scheme starting as soon as possible after that.