Affordability continues to be a major hurdle. Aware that there is a market desire to purchase property, Barratt Redrow and Persimmon have partnered with Barclays and TSB to open more opportunities for prospective customers to invest in the property market. This initiative has materialised under the Rezide Equity Loan scheme, which, among other provisions, enables buyers to secure new-build homes with a deposit as low as 5% for a new-build property.
‘We’re delighted to join this initiative and help yet more people get on the property ladder’, Lee Chiswell, head of mortgages at Barclays, commented, adding that this initiative will contribute towards Barclays’ overall strategy ‘on making home ownership more affordable for first-time buyers and movers’.
Initiative Outline
Under the Rezide Equity Loan initiative, a buyer, whether a first-time or existing homeowner, will need to provide only a 5% equity deposit, as opposed to the market standard of a 20% deposit for a new-build property. Crucially, the Rezide Equity Loan will cover 15% of the property’s market value, up to a maximum loan amount of £100,000. The remaining 80% of the purchase price will be financed through a mortgage provided by Barclays or TSB.
Take the following example: a property valued at £300,000, around the national average for a property in England, would require a £15,000 deposit from the buyer. The Rezide Equity Loan will provide £45,000 of the property’s value. The buyer will then be eligible to seek out a £240,000 mortgage scheme from Barclays or TSB to cover the remaining costs.
The repayment value adjusts proportionately to any changes in the property’s market value. The loan product is non-amortising, with a fixed interest rate of 4% for the entire term of the loan. There are no early repayment charges, and the minimum income required to qualify is typically lower than that required to obtain a 95% LTV mortgage equivalent.
In some respects, the initiative aims to fill the gap left by the Government’s closure of the Help to Buy scheme in March 2023. Under the Help to Buy scheme, only a first-time buyer could purchase a new-build property with a 5% deposit, while the Government would lend the buyer an equity loan between 5% and 20%. (In London, the highest amount was up to 40%.)
By comparison, the Rezide Equity Loan offers broader eligibility to customers from a variety of financial circumstances.
Initiative Consequences
Matthew Northover, chief investment officer at QSix, said: ‘By helping to lower affordability constraints for homebuyers, the new scheme will enable housebuilders to accelerate new developments and meet the new government’s objectives for new homes.’
A critical advantage of the Rezide Equity Loan initiative is that it lowers the financial barriers for both first-time buyers and existing homeowners to invest in the market.
In addition to the flexibility the Rezide Equity Loan initiative provides, the scheme’s provisions furnish a greater degree of clarity and security than other types of mortgage schemes. As Adrian MacDiarmid, head of mortgages at Barratt Redrow, said, the purpose of these provisions is ‘helping make ownership a dream a reality’ for buyers across the market.
In doing so, it will assist in fertilising market activity in an important area of the market. Considering that the Government has pledged to build 1.5 million properties by the end of the parliamentary term, the highest volume slated to be built within a five-year period since the late 1960s, the Rezide Equity Loan initiative is playing a critical role in supporting the property market.
Reflecting on the impact the initiative will bring to the market, Craig Calder, secured lending director at TSB, argued: ‘At TSB, we’re pleased to support this innovative new mortgage solution so we can help more customers make their money go further. Whether you’re buying your first home or making a fresh start, this is a great new way to help open the door to property ownership and our specialist new-build team at TSB are on hand to support you.’
Overall Objectives
Driving this initiative is the desire to confront the affordability challenges that continue to influence market activity. For some prospective buyers, these challenges are causing significant delays in securing a property.
In essence, this initiative sets out to weaken the barriers that have consistently discouraged or delayed buyers from entering the market. What sets it apart from other schemes is the twofold quality of flexibility and security, two highly valued features for any loan scheme.
This scheme will play an important role in supporting many prospective buyers in investing in new-build properties.
