The Home Builders Federation (HBF) told Development Finance Today that fewer buyers require shared equity loans from housebuilders following the introduction of Help to Buy in 2013.

The announcement comes just months after the introduction of the Mortgage Credit Directive (MCD), which made shared equity loans subject to Financial Conduct Authority (FCA) regulation.

David O’Leary, policy director at the HBF, said: “The overwhelming success of the Help to Buy equity loan scheme over the past three years in supporting buyers has had a direct impact on housing supply and reduced demand for shared equity products.

“The continuation of the scheme beyond the end of the decade means that in the short term this is unlikely to change and provides time for housebuilders to plan for the needs of future homebuyers and ensure compliance with the MCD in relation to new mortgage originations.”

In March, the FCA announced that housebuilders offering shared equity loans had four options to choose from.

Firms could decide to stop offering shared equity schemes, obtain FCA authorisation, outsource the loan or write it off and release the charge.

However, the HBF says that there is now less demand for shared equity loans from housebuilders.

Under Help to Buy, the government offers an equity loan for up to 20% of the cost of a newly built home.

This means buyers would require only a 75% mortgage along with a 5% deposit.

Borrowers are also not charged fees on the 20% equity loan for the first five years of homeownership.