Lloyds cuts Help to Buy equity loans to £150k

5 August 2014

Lloyds Banking Group, the UK's biggest mortgage lender, has cut the amount it will lend through the Help to Buy equity loan scheme to £150,000, down from £500,000.

The reduced limit is below the £155,975 average mortgage required by people who bought new build properties through the government scheme during its first 15 months of operation.

However, the banking group said the "majority of SE [shared equity] and SO [shared ownership] applications we receive are below £150,000".

The Help to Buy scheme loan allows people with a 5% deposit buy new build properties with the 'help' of a 20% equity loan from the government - meaning they require a mortgage of 75% of the property price from a lender rather than 95%.

During its first 15 months, the average price paid for a new-build home was £207,967.

The cap introduced by Lloyds Banking Group - which applies to all of its shared ownership and equity loans across Lloyds Bank, Halifax and Bank of Scotland - is said to be "temporary".

A spokesperson for the group said: "We have taken the decision to temporarily cap shared equity and shared ownership lending to £150,000. This is a prudent, short-term change that reflects the fact that we currently hold around a 50% share of this market and is a further step to focus our activity on supporting first-time buyers who have limited options to get onto the ladder."

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They added: "We remain committed to supporting the affordable housing sector and new build market, recently extending our Help to Buy Mortgage Guarantee Scheme to allow applications for those with a 5% deposit on new-build properties."


Jonathan Harris, director of mortgage broker Anderson Harris, told Moneywise: "While Help to Buy has proven popular, this move by Lloyds suggests lenders are still wary of too much exposure to the high loan-to-value market. With 50% of this market already, the lender has concerns about becoming over-exposed.

"By reining back and offering a more modest maximum loan size, Lloyds will be hoping for a natural adjustment before potentially moving back into the market, although that is not guaranteed."

However, he added: "The move means less choice for first-time buyers, particularly those buying in the South East where property values are that much higher."

Across the group, Lloyds currently has a range of first-time buyer Help to Buy mortgages available. Through to equity loan scheme it has a two-year fix at 3.94% with no fee and through the mortgage guarantee scheme it has two two-year fixes at 5.19% with a £995 fee and 5.59% with a £0 fee for buyers with a 5% deposit.

Outside of the scheme, for first-timers with much bigger deposits of between 25 and 40%, Lloyds Bank is offering cashback in the form of a preloaded MasterCard giftcard of up to £700 until 6 October 2014.

The incentive applies to customers taking out the first-time buyer two-year fix at 0 to 60% loan-to-value (LTV) at 2.44% with £995 fee, or the 60 to 75% LTV version at 2.84% with a £995 fee.

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