Weston Homes, together with the policy consultancy TYI Strategy, has launched a policy paper calling on the government to adopt a new developer-funded, government-backed “Loan-to-Own” Scheme to help first-time buyers onto the housing market. The paper sets out how supporting first-time buyer demand will reboot progress towards the government’s mission to deliver 1.5 million new homes.
Weston Homes says that, despite continued enthusiasm for homeownership, many young people remain unable to afford their first step onto the housing market. Deposit requirements continue to be the biggest barrier, with Weston Homes’ own data revealing a sharp fall in first-time buyer purchases since the end of Help to Buy, and 79% of those who are able to proceed requiring support from the Bank of Mum and Dad. Meanwhile, higher mortgage rates and strict affordability tests block many from accessing 95% loan‑to‑value mortgages.
To address this, Weston Homes and TYI Strategy are proposing the Loan-to-Own Scheme: a government-backed equity loan of up to 20% of the property’s value, interest-free to the buyer for the first five years, with developers covering a 5% annual coupon to HM Treasury during that period.
This structure would give first-time buyers the reassurance of a government-run initiative, while the upfront financing cost is borne by developers. After the five-year period, buyers would be able to refinance and choose whether to absorb all or part of the equity loan into their mortgage.
If introduced today, Weston Homes and TYI Strategy estimate that this Loan-to-Own model would enable a minimum of 70,000 additional first-time buyers over five years to get on the housing ladder, while delivering a typical saving of approximately £500 per month based on mortgage payments on a 30-year, 75% mortgage, compared to a 95% mortgage.
One of the core strengths of the proposal is that it is designed to be cost neutral or revenue generating for taxpayers. In most modelling scenarios, the payments developers make to the government would exceed the cost of financing the loans.
Weston Homes says that the lack of buyer demand is affecting housing delivery as well as buyers. Developers rely on steady demand to build new homes, and historically, there has been a close link between the number of housing transactions and the number of new build completions. When demand falls, build-out slows down and sites can be paused. The housebuilder says that helping first-time buyers is essential if the government is to deliver its flagship 1.5million new homes target.
Bob Weston, chairman of Weston Homes, said: “Every week, we meet young people who want to buy a home but simply cannot make the numbers work. The market is stagnant. Housebuilders need buyers and a more buoyant market if they are to build at the levels this government needs to hit its admirable housing targets. Restoring market liquidity is not simply a social objective, it is a delivery imperative.”
Jethro Elsden, chief economist at TYI Strategy, added: “TYI Strategy have been delighted to work closely with Weston Homes on the development of the Loan-to-Own proposal. Our analysis shows that supporting first-time buyers in accessing housing finance in a targeted, fiscally responsible way can have a meaningful impact and not only help more first-time buyers get on the housing ladder but also work hand in hand with supply side reforms to boost the delivery of new homes. This scheme demonstrates that it is possible to unlock access to homeownership, support market liquidity and accelerate build-out rates while remaining cost-neutral, or better, for the taxpayer.”
