The Help to Buy Equity Loan has supported more than 62,000 sales of new homes since its launch in April 2013, making it by far the most effective Government support scheme for new builds to date.

Across the country, approximately a third of new homes sales by the major housebuilders are supported by the scheme. It has had the biggest impact in the lowest value markets, but has made little difference in most parts of London, where values are either above the threshold or still too expensive even with the Government support.

Now, as well as extending the scheme until 2021 throughout the country, the available equity loan under Help to Buy has been increased to 40 per cent of the value of a new home in London, obviously aiming to increase accessibility to the market in the Capital.

Our analysis shows that the increase in the size of the loan from 20 per cent to 40 per cent would enable a household with an income of £50,000 to buy a lower quartile new home in 20 of London’s 33 boroughs. This compares with the previous position where the same household would only be able to access a lower quartile new home in eight boroughs with a 20 per cent equity loan.

The map below shows the percentage of new homes that a household with an income of £50,000 could afford in each London borough using the new Help to Buy London.

Since the Autumn Statement, Minister for Housing and Planning Brandon Lewis has been quoted saying that Help to Buy Equity Loan will be available on Starter Homes, although no further details or formal confirmation is available. Certainly, combining the two schemes would have a significant impact in London for first-time buyers.

After securing a 20 per cent discount on the open market price, buyers would have access to a 40 per cent equity loan on the remaining amount. We expect they would still need to have a deposit covering five per cent of the full price, as is the case under current Help to Buy rules. But combining both schemes means that a buyer would only require a mortgage for 44 per cent of the value of the property.

With many of the details yet to emerge, it is difficult to gauge at this stage how the two schemes will interact, complement each other or overlap. Given that both schemes target a similar demographic, there is a strong chance that there will be stronger demand for Starter Homes which potentially offers a better deal to the buyer, assuming the quality of housing is the same.

Further information

Read more at Savills Research