Maximum loan size 'temporarily' cut to £150,000.
Lloyds Banking Group has slashed the maximum loan size available to borrowers using the Help to Buy equity loan scheme to £150,000.
The new limit on lending is being enforced across its shared equity and shared ownership loans, which includes the first phase of Help to Buy.
Previously the group, which offers the deals through its Lloyds Bank, Halifax and Bank of Scotland brands, would accept applications asking for up to £500,000.
What is Help to Buy?
Help to Buy is a Government-backed initiative that offers the choice of two schemes to help people with small deposits buy a home.
The equity loan, which was the first phase of the scheme to launch, involves an interest-free Government loan to help those with at least a 5% deposit buy a new-build property, which can be worth up to £600,000 in England, £400,000 in Scotland or £300,000 in Wales.
The mortgage guarantee side, which launched second, also requires at least a 5% deposit but involves the Government acting as a guarantor on the mortgage to help purchase any type of residential property up to the value of £600,000.
Read more in Help to Buy mortgages explained.
Cooling Help to Buy down
Both strands of Help to Buy have proved popular.
According to the latest figures 27,167 sales completed using an equity loan since the scheme launched in April last year while 7,313 have been completed using the mortgage guarantee which launched later in October 2013.
In Scotland the £140 billion 2014/2015 budget for Help to Buy equity loans has already run out, with the scheme not able to take any new applications until next year when it gets fresh funding.
Critics have warned the scheme will fuel house price growth and create a new housing bubble. And it seems the UK's biggest mortgage provider has heeded this warning by trying to curb lending on its equity loan deals.
A spokesperson for Lloyds Banking Group said the move was "temporary", but was "prudent" given it currently holds a 50% share of the market.
With a 70% reduction on its maximum loan size this could be seen as a way to price out many, especially in the south east where property prices are highly inflated and typically well above the £150,000 limit.
However, Lloyds maintains the majority of applications it receives using affordable housing schemes were for properties below £150,000.
Growing trend
Lloyds isn’t the only major lender to attempt to reign in lending on Help to Buy equity loans.
In June, Nationwide limited access to its Help to Buy equity loans to just first-time buyers.
This move is at odds with the nature of the scheme as Help to Buy, unlike other affordable housing initiatives, has been designed for home-movers as well as first-time buyers.
But Nationwide's new lending criteria no longer allows 'second steppers' - often families looking for a bigger property - to take part.
Lloyds has also said it wants to focus on first-time buyers. The group lent one in four of all new loans to UK first-time buyers who completed in the first half of 2014.
So thanks to this stricter criteria, some buyers the Help to Buy scheme was originally meant to help could find they no longer qualify.
Alternative equity loan lenders
There are other lenders that you can try if you no longer fit the criteria of Lloyds, Nationwide and the rest.
Leeds Building Society, Skipton Building Society, Woolwich, Virgin Money, Royal Bank of Scotland and NatWest all offer Help to Buy equity loans to those in England, Scotland and Wales.
To find the best deals take a look at: The best Help to Buy mortgages.
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