Scots Help to Buy scheme limit set to be £400k

Holyrood set aside £120 million for its version of Chancellor George Osbornes interest-free loan scheme. Picture: TSPL

Holyrood set aside £120 million for its version of Chancellor George Osborne’s interest-free loan scheme, which has been credited with reviving the market south of the Border but criticised for pushing up prices and potentially creating a new house-price bubble.

Scottish ministers have so far revealed few details about their own version but industry insiders say a £400,000 cap is expected, £200,000 lower than in England, because of concern that the Osborne scheme subsidises wealthy home purchasers as well as first-time buyers.

It is also likely to be set at a lower level because average house prices in Scotland are well below those in most regions of England, particularly London and the south-east.

Mike Killoran, finance director of homebuilder Persimmon, said: “We are looking forward to the introduction of the Scottish equivalent of Help to Buy. There seems to be an indication the maximum property value will be £400,000, and that’s something that will help people [to buy a home].”

Osborne introduced the measure to stimulate a housing market which has been sluggish since the early days of the credit crunch and the recession. Backed by £3.5 billion of taxpayers’ money, Help to Buy offers a loan of 20 per cent of the purchase price of a new home. It is interest free for five years, after which charges kick in at a rising rate.

Housebuilders have been delighted with its effect, with Persimmon saying last week the scheme helped half-year profits rise 40 per cent to £135m.

Ed Monaghan, chief executive of Glasgow-based builder Mactaggart & Mickel, said Scottish firms have been studying the English scheme to prepare for its introduction in Scotland, and are expecting to ramp up activity.

“We’ve got time to learn the impact it’s had down south, and there’s nothing to suggest that won’t be reflected up here,” he said. “We are looking at how we can build and offer more houses to the market and that’s exactly what the scheme is supposed to do.”

He said that, from the clues given by ministers so far, Scottish builders were expecting a similar programme to the English scheme, but drafted with Scottish law in mind and a lower value threshold.

“I don’t see that as a big obstacle, given that prices are generally lower in Scotland than in some parts of England,” he said.

Monaghan added that, by stimulating construction, the scheme should keep prices stable, as it is under-supply that arguably causes values to increase.

The Scottish Government already offers residential property support including the MI New Home mortgage indemnity scheme, a Homes for Scotland and Scottish Government project which helps those with small deposits to buy new homes worth up to £250,000.

The scheme works in conjunction with builders, who set aside part of the purchase fee of a home and use it, alongside government-matched funding, as a guarantee against a mortgage of up to 95 per cent of the value of the house.

Holyrood was awarded funding as a consequence of the launch of Help to Buy in England. In May, Deputy First Minister Nicola Sturgeon said £120m would be used to support people who buy new-build homes on a shared equity basis. The money will be available over the next two years to both first-time buyers and existing homeowners.

The Scottish Government did not confirm the £400,000 figure, saying details were still being finalised.

A spokesman said: “The Deputy First Minister announced in May that the Scottish Government has committed £120m over the next two years to support a new shared equity scheme to help first-time buyers and those looking to move to buy a new home – part of a commitment to invest an additional £290m in loans and equity support for housing. Our intention is to introduce a scheme as soon as possible which meets the specific needs of the Scottish market, supports homebuyers, stimulates the economy and protects and creates jobs.

“We are working towards the scheme being available in the autumn and we will announce details in due course.”

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