The last government’s Help to Buy scheme ended in 2023 – a scheme that allowed buyers (by the end, first-time buyers only) to purchase property with smaller 5% deposits topped up by a government-backed loan – and so far it is something which the current government has not chosen to revisit.
Now, however, and ostensibly due to ‘frustrations’ with the status quo, two of the UK’s biggest housebuilders – Barratt Redrow and Persimmon Homes – have teamed up with Barclays and TSB to launch their own 5% deposit scheme – a scheme they are calling the ‘Rezide Equity Loan’.
At first glance, it looks a lot like Help to Buy, with many buyers, and especially stretched first-time buyers, wondering if it could spell the answer they’ve been looking for
That said, there are some key differences buyers should understand before diving in.
The government-backed Help to Buy scheme, launched in 2013 and administered by Homes England, was designed to help buyers purchase a new-build home with a smaller deposit. It was not only first-time buyers, as many think, although from 2021 until the scheme closed in March 2023 it became restricted to first-time buyers only.
Under the scheme, in any case, buyers needed to put in a deposit of just 5% of the property price upfront, with the government providing a 20% equity loan (or up to 40% in London). The remaining 75% (or 55% in London) came from a standard mortgage.
Crucially, the government loan was interest-free for the first five years, making it far more affordable in the short term. After that, buyers paid a low, rising rate of interest until they repaid the loan, either when selling the property, remortgaging, or clearing it in full.
Help to Buy made homeownership achievable for hundreds of thousands of people who couldn’t otherwise save a large deposit – quite literally! A Government report stated that 514,868 property purchases had been made under the scheme, £786,000,000 of property sales), and at the same time it helped developers sell new homes quickly, encouraging the construction of more new sites.
However, critics argued that it pushed up the prices on new builds and left some buyers struggling to remortgage when the interest-free period ended, due to that sense of falsely inflated equity from the outset.
Nevertheless, when the scheme wound down in 2023, it did leave a gap in the support for first-time buyers and reduced their ability to get on the ladder. This is the space that this Rezide scheme and any others that might follow are now trying to fill.
The Rezide scheme lets you buy a new-build home from Barratt Redrow or Persimmon Homes with just a 5% deposit.
Here’s how it works:
The equity loan carries a 4% fixed interest rate for the entire term and can be repaid when the buyer either sells the property or remortgages. There are no early repayment penalties, and it’s open to both first-time buyers and existing homeowners alike.
In today’s market, saving even a 10% deposit can feel like climbing a mountain. Here in Herne Hill, where our average asking price is currently £762,765 according to Rightmove; that means buyers must save around £80,000 on average, to cover not only a10% deposit but also various moving costs, survey fees, legal fees etc; and that isn’t even to mention stamp duty, of course.
There are 95% mortgage options out there (i.e. where a 5% deposit would do), but better deals tend to come through once there is a 10% deposit provided – and better still once the deposit is at 15%, 20% or better.
A 5% deposit option topped up with a 15% equity loan, backed by big names such as these, might sound like the helping hand many people have been waiting for, especially as mortgage rates remain relatively high – inching upwards towards 5% again on average this month, for the first time since February this year, as reported by the BBC and others in the last few days. As a result, affordability clearly continues to bite.
For some buyers, it could seem to be the difference between getting on the ladder now or waiting another year or two.
Despite the appeal, there are reasons to take a moment to stop and think, because as attractive as it may seem in certain respects, there are restricting factors and costs to consider.
The biggest limitation is that buyers can only use the scheme on new-build homes from those developers.
That means buyers potentially having to compromise on:
There is also some consideration to be had when it comes to the 4% interest rate. It might well seem reasonable - but it is not interest-free, unlike the original Help to Buy loan which offered a five year grace period.
Over time, that extra cost adds up – although, currently, 4% is still less than the average mortgage rate that first time buyers tend to be able to take – especially those with 5% deposits.
However, if mortgage rates do fall further – and cuts to the Bank of England base rate are expected over the next few months – the average mortgage rate could conceivably fall to below 4% (it is as mentioned currently back up at around the 5% mark – BBC).
It’s encouraging to see the private sector step up with creative solutions, but it’s still a developer-backed incentive – and something that ultimately has been conceived and designed in order to sell their properties.
Before signing anything, always:
It’s good to see innovation returning to the housing market, but perhaps when it comes to ‘New Build’ help to buy affordability schemes, they aren’t going to be a one-size-fits-all fix.
If you’re buying your first home, take the time to explore every option, including smaller properties, different areas, or other types of shared ownership schemes.
The right move for you isn’t just about what’s possible on paper; it’s about finding a home that truly fits your life.
At Petermans, we’re always happy to offer an honest perspective on your next step. Whether you’re buying, selling, or just starting to plan, our Herne Hill team is here to help you make your next move with confidence.
We are required by law to conduct anti-money laundering checks on all those selling or buying a property. Whilst we retain responsibility for ensuring checks and any ongoing monitoring are carried out correctly, the initial checks are carried out on our behalf by Lifetime Legal who will contact you once you have agreed to instruct us in your sale or had an offer accepted on a property you wish to buy. The cost of these checks is £60 (incl. VAT), which covers the cost of obtaining relevant data and any manual checks and monitoring which might be required. This fee will need to be paid by you in advance of us publishing your property (in the case of a vendor) or issuing a memorandum of sale (in the case of a buyer), directly to Lifetime Legal, and is non-refundable. We will receive some of the fee taken by Lifetime Legal to compensate for its role in the provision of these checks.