James Caan launches stamp duty loans scheme

Dragons' Den star James Caan will offer homebuyers interest-free loans. Photograph: Rex Features

Homebuyers will be offered interest-free loans to cover stamp duty and solicitors' fees under a scheme launched today by Dragons' Den entrepreneur James Caan.

Anyone buying a property advertised on Look4aProperty.com, a website part-owned by Caan, will be offered a loan of up to £50,000 from a £1bn fund.

The size of the loan will be determined by the cost of stamp duty, which is levied at 1% on properties that cost more than £175,000 but less than £250,000, 3% on homes between £250,001 to £500,000, and 4% on homes costing £500,001 and above, and solicitor's fees. Look4aProperty expects the typical loan size to be around £10,000.

"The housing market needs stimulation, it needs a kick-start, and we believe that offering interest-free loans is the sort of catalyst that is needed," Caan said.

The loans can be taken out over a two- to three-year period and will need to be paid back in monthly instalments over this time.

For example, on a £5,000 loan over a three-year repayment period the interest-free monthly repayments would be £138.89 a month.

The £1bn fund behind the deal is provided by Hitachi Capital, a company that provides financial products including interest-free point of sale credit to retailers.

The business works through a tripartite agreement between Look4aProperty, estate agents and conveyancing company LMS, which will run the back-office work for the scheme.

Each company will put a percentage of the commission it earns through business generated by the scheme towards paying back the interest on the capital, enabling homebuyers to have the loans without having to pay interest.

Caan believes estate agents will register for the scheme because it will mean more buyers will be able to get a foot on the ladder, or the next rung of the ladder.

"The size of mortgage banks and building societies are willing to lend has gone down, meaning homebuyers need bigger deposits to be able to buy," he said.

"If, as an estate agent, you can help by introducing that buyer to a property that will come with an interest-free loan to cover some of their costs, that could make the difference between them buying or not buying."

Estate agents will typically pay £200 to register with Look4aProperty and will have to hold a consumer credit licence. They will not have to be registered with the Financial Services Authority because interest-free credit is an unregulated lending product.

If borrowers run into difficulty or are unable to repay the loan, the same collection procedures apply as with other providers of unsecured credit, Look4aProperty said.

The loans are available to first-time buyers and existing homeowners wanting to move, but will only be of interest to people buying property costing more than £175,000: properties for less than this amount are currently exempt from stamp duty as a result of a government stamp duty holiday, but this is due to expire at the end of the year.