IN the context of the highly successful Help to Buy (HTB) initiative, which was introduced to make it easier for people to buy a new home and sees the Scottish Government provide up to 15 per cent interest-free equity loans on new build properties up to £200,000, Kevin Scott asks if housebuilders should be funding equity loans themselves ("Should housebuilders be funding equity loans?", Herald Business, March 13).
Whilst private shared equity schemes used to be a common feature of the new build housing marketplace, European Mortgage Directive changes mean it is now near-impossible for home builders to offer this type of second charge lending to customers as they would be subject to the same level of Financial Conduct Authority regulation as banks and building societies. Clearly, the level of cost and complexity involved make this an unviable proposition, especially for smaller builders. Crucially, however, Government equity schemes such as HTB are exempt from this regulation and, with any builder able to register for the scheme, the accessibility of HTB provides a level playing field between home builders and maximises choice for customers.
The scheme has also been responsible for unlocking many development sites in Scotland. Without it, not only would more of the Scots who aspire to own their own home be locked out of the market as they would face an even greater struggle to save high deposits, the number of much needed new homes would also be reduced.
In terms of the public money allocated to HTB that it is suggested could have been spent overhauling the planning system, it is important to note that the consequential HTB funding received from Westminster takes the form of financial transactions, meaning that it cannot be used to support such revenue budgets. Instead, it has to fund loans that must be repaid with all proceeds returning to Westminster. In any event, it is worth noting that the resources committed to HTB in Scotland represents a fraction of the consequential financial transaction funding stemming from Westminster budget announcements. Highlighting this, whilst Homes for Scotland would like to see £100 million allocated to extend the scheme in Scotland until 2021, this actually equates to just 10 per cent of the £1 billion that the Scottish Government will receive as a consequence of the Westminster HTB scheme.
Karen Campbell,
Director of Policy, Homes for Scotland,
5 New Mart Place, Edinburgh.
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