Can Developers Replace Help to Buy? Equity Funds and Buyer Support Explained
For more than a decade, the government’s Help to Buy scheme helped drive demand for new-build homes across the UK, giving first-time buyers the boost they needed to access homeownership. But since its closure in 2023, there is no major national support to help first-time buyers purchase new-build homes.
This raises an important question for the sector: if government support is no longer guaranteed, could homebuilders themselves help fill the gap?
First-time buyers are arguably the foundation of the housing market. When new buyers enter the market, they unlock the housing chain, enabling existing homeowners to move up the ladder and supporting the delivery of new homes. Without them, the entire property ladder slows, which affects sales rates, development pipelines and overall housing supply.
Rising deposit requirements, higher mortgage rates and stagnant wage growth have all made entering the market increasingly difficult. First-time buyers have never needed help to enter the property ladder more so than now and for developers, the stakes are high. Ensuring that first-time buyers can still access new-build homes could be the key to keeping the sector moving, as well as sustaining long-term housing delivery.
In response to this situation, the Home Builders Federation (HBF) has suggested that the industry itself could play a role in supporting buyers, potentially through the creation of an equity fund backed by homebuilders.
If implemented, this could represent a significant shift in how the sector helps new buyers access homeownership.
The Growing Affordability Challenge for First-Time Buyers
Affordability has always been one of the biggest barriers to homeownership, but recent economic conditions have intensified the issue. As performance bond specialists Nationwide Sureties Ltd explains, ‘The combination of soaring mortgage rates, stagnant wage growth, and persistent inflation is creating a near-impossible landscape for those trying to get on the property ladder.’
For developers, the reduced pool of first-time buyers can quickly translate into slower sales rates and delayed site delivery.
The HBF has often highlighted that support for first-time buyers is essential to maintain housing supply levels and meet government targets for new homes. As their response to the Spring Budget pointed out, ‘Potential home buyers are facing an affordability crisis, which is impacting housing supply. Without measures to support demand, particularly among first-time buyers, delivery will remain under pressure.’
Without this demand at the bottom of the market, the entire housing delivery pipeline slows down.
The Gap Left by Help to Buy
Between 2013 and 2023, the government’s Help to Buy equity loan scheme played a major role in supporting new-build sales.
The scheme allowed first-time buyers to purchase new homes with an equity of up to 20% of the property value and then supported a standard repayment mortgage covering the remainder. The scheme reduced the mortgage loan-to-value (LTV) ratio and helped buyers access more competitive mortgage products.
The Help to Buy scheme supported hundreds of thousands of purchases, however, with the scheme now closed, there is currently no direct national replacement, which has created uncertainty for both buyers and developers.
The HBF’s Proposed Equity Loan Model
To address the issue, the HBF has proposed a new equity loan structure designed to support first-time buyers while limiting the burden on government finances. ‘The proposed scheme would provide an equity loan of up to 20%, funded through a combination of Government support and a developer fee, ensuring value for taxpayers,’ argues HBF.
‘The scheme would require first-time buyers to have a 5% deposit, which would be matched by a 15% equity loan from the government. This would include a developer fee from a participating developer, equal to around 1% of the sales price,’ advises Mortgage Solutions.
The goal is to reduce the effective LTV for mortgage lenders to around 80–85%, which typically unlocks more competitive mortgage rates. For buyers, this could mean lower monthly repayments, easier access to mortgage approval and reduced deposit barriers. For developers, it could mean a larger pool of eligible buyers for new-build homes.
Could the Homebuilding Industry Create Its Own Equity Fund?
The homebuilding sector already has experience in collaborative initiatives designed to support buyers. One example is the Deposit Unlock scheme, developed by the industry and supported by mortgage insurance providers. The scheme is ‘designed to help your customers secure a new-build home with just a 5% deposit.’ It therefore allows lenders to offer 95% loan-to-value mortgages on new-build homes.
So, when developers, lenders and insurers work together, the sector can develop innovative solutions that improve buyer accessibility.
An industry-backed equity fund could potentially work in a similar way.
Developers could contribute to a pooled fund that provides shared equity loans to buyers purchasing new-build homes. The equity stake would then be repaid when the homeowner sells or remortgages.
The model would effectively allow the industry to invest directly in sustaining its own demand pipeline.
Of course, there would be challenges, such as funding scale, risk management and regulatory oversight but the concept highlights how the sector could play a more active role in solving the affordability puzzle.
Supporting Buyers Beyond Financial Assistance
While deposit support schemes are important, financial assistance alone is not the only factor influencing first-time buyers. The homebuying process itself can be overwhelming for those purchasing their first property.
From mortgage approvals and legal processes to warranties and aftercare, many buyers are navigating unfamiliar territory.
Developers who provide clear guidance and support throughout the journey will see significant benefits, such as improved customer confidence, smoother completions, stronger customer satisfaction scores and better long-term brand reputation.
Many homebuilders focus on both affordability initiatives and improving the overall buyer experience.
Enhancing the First-Time Buyer Experience
Communication plays a vital role in helping buyers understand and progress through the homebuying journey. Homebuyer information packs and welcome folders are a great way to provide structured guidance during the purchase and completion process.
At Classic Folios and Spaciable, we’ve specialised in producing these products for housebuilders and property developers for over 25 years. Our Reservation Manuals can be particularly helpful for first-time buyers who are unfamiliar with the homebuying process, as they guide buyers through each stage of the purchase, working as a tick list of tasks that need to be completed and when. They also provide a helpful list of FAQs that give buyers the confidence to move forwards without having to pick up the phone to your customer care team.
Following the sale of the home, our Home User Guides provide comprehensive, plot-specific information and include all the guidance your homebuyers need to move into and live in the new home with confidence, such as a guide on how to use and maintain the home’s features and appliances, a local area guide, and a list of key contacts should they ever need to get in touch.
As customer expectations continue to rise across the housing sector, tools like these are increasingly viewed as an important part of delivering a professional, customer-focused buying journey.
The Future of First-Time Buyer Support
Whether through government schemes, lender partnerships or industry-led initiatives, the one thing that remains clear is that supporting first-time buyers is essential for a healthy housing market.
Without strong demand from new buyers, the pace of housing delivery across the UK inevitably slows. The Home Builders Federation’s suggestion of an equity fund highlights an important shift in thinking, one where the industry itself could play a greater role in supporting accessibility to homeownership.
At the same time, forward-thinking developers are also recognising that supporting buyers goes beyond finance. By improving communication, guidance and the overall purchasing experience, homebuilders can help ensure that first-time buyers feel confident taking that crucial first step onto the property ladder.
In the years ahead, the most successful developers will likely be those who combine financial innovation with exceptional customer support to create a buying experience that is both accessible and reassuring for the next generation of homeowners.
If you’d like to find out more about how our products can support first-time buyers or to discuss your upcoming projects, please get in touch.
FAQ: Supporting First-Time Buyers for Homebuilders
1. Why is supporting first-time buyers so important for homebuilders?
First-time buyers drive demand for new-build homes. Healthy sales at the entry level of the property market ensure faster site absorption, stronger pipeline confidence and long-term housing delivery. Without them, the entire property ladder slows.
2. What happened to the Help to Buy scheme?
The government’s Help to Buy equity loan scheme ended in 2023. It previously allowed first-time buyers to purchase new-build homes with a government equity loan of up to 20%. Its closure has left a gap in market support.
3. What is the HBF’s proposed equity loan model?
The Home Builders Federation suggests a model where buyers contribute a 5% deposit, an equity loan covers around 15%, and developers contribute a small fee (~1%) to fund the scheme. This reduces the mortgage loan-to-value ratio, making borrowing easier for buyers.
4. Can developers create their own equity support scheme?
Yes. Industry-led models, such as Deposit Unlock, show it’s possible to collaborate with lenders and insurers to provide high-LTV mortgages. A pooled equity fund could be a future option to help buyers while sustaining demand for developers.
5. How else can homebuilders support first-time buyers?
Beyond financing, structured guidance throughout the homebuying journey is critical. Reservation Manuals and Home User Guides improve buyer confidence, reduce confusion, and enhance the overall customer experience.
6. What are the benefits of industry-led support for developers?
Supporting buyers directly can increase sales, reduce abandoned purchases, and improve customer satisfaction. It also helps sustain long-term demand, protecting both the viability of new developments and the health of the housing market.
7. Where can developers find tools to improve the buyer experience?
We offer professionally designed Reservation Manuals and Home User Guides that steer first-time buyers through the purchasing process. Learn more at www.classicfolios.com