Wales’ version of the Help to Buy equity loan scheme will launch in January.
Last week, housing minister Carl Sargeant announced the £170m scheme, called Help to Buy Cymru, will support the purchase of around 5,000 new homes in Wales during the next two and a half years.
Sargeant says: “The Help to Buy – Wales scheme beginning in the New Year, will help more people get onto the property ladder and will provide much needed boost to the building industry in Wales.”
Council of Mortgage Lenders director general Paul Smee says: “We believe the scheme will have a positive effect in improving conditions for home-buyers which the CML fully supports.”
Borrowers will be able to purchase a new-build home worth up to £300,000 with as little as a 5 per cent deposit. The home must be the borrower’s sole residence and the scheme is not open to buy-to-let investors.
The Welsh Government will then fund a shared equity loan of up to 20 per cent of the purchase price. Buyers will then need to secure a mortgage to cover the remaining balance.
The shared equity loan will be repaid when the home is sold, with 20 per cent of the sale price being repaid to the Welsh Government.
From the time a buyer receives the shared equity loan they will be charged an administration fee of £1 a month but no interest is paid for the first five years.
Then, in the sixth year, borrowers will be charged interest of 1.75 per cent per year of the original shared equity loan amount.
After this, the interest will increase every year, like the English version of the scheme. This increase is worked out by using the Retail Prices index plus 1 per cent.
So far Nationwide Building Society and Monmouthshire Building Society have committed to joining the scheme, while Mortgage Strategy understands Principality Building Society also plans to launch products for the scheme at some point.
Speaking at the launch event on 25 November in Cardiff, Nationwide senior manager for group intermediary sales James Chidgey said: “That so many housebuilders and specialist new-build brokers are here tells us that this assistance is much needed by first-time buyers and home movers in Wales.”