The initiative is being positioned as a private-sector response to the closure of the government’s Help to Buy scheme, which ended in March 2023

UK housebuilders Barratt Redrow and Persimmon have launched an initiative aimed at improving access to home ownership by enabling buyers to buy a property with a 5% deposit.

Under the scheme, homebuyers only need a 5% of the purchase price for the deposit, with a further 15% funded by Rezide Equity Loan. The equity loan is capped at £100,000 and carries a fixed 4% interest rate for the duration of the term.

The remaining 80% of the purchase price will be financed through a mortgage from Barclays or TSB.

Buyers need to consider that they will be paying two loans under the scheme, the mortgage and the equity loan.

The scheme will initially be available exclusively to buyers of Barratt Redrow and Persimmon homes, with plans to roll it out more widely across England in the coming months.

The repayment value of the Rezide Equity Loan will adjust up or down, in the same proportion as any changes in the underlying home’s value, and there are no early repayment charges.

The initiative is being positioned as a private-sector response to the closure of the government’s Help to Buy scheme, which ended in March 2023. Help to Buy allowed first-time buyers to purchase a home with a 5% deposit, supported by a government-backed equity loan of up to 20% outside London (and 40% in London).

Adrian MacDiarmid, head of mortgages at Barratt Redrow, said the scheme aimed to tackle affordability constraints faced by a broad spectrum of buyers: Affordability remains a big challenge for many people – not just first-time buyers but also growing families looking to trade up or people wanting a smaller home coming out of a relationship.

Since Help to Buy ended many people have felt home ownership is beyond them. This is why we have worked across the industry to design a mortgage for people to buy a new build property with just a 5% deposit – helping make the home ownership dream a reality for them, he added.

Edward McCoy, group sales director at Persimmon, said: Persimmon is always looking for new ways to improve customers’ opportunities to buy a home. We therefore welcome the launch of the new Rezide Equity Loan scheme, as it will add another useful product that enhances affordability. We look forward to welcoming many new homeowners through this innovative new product.