Firstrung: OMHB won't help first-time buyers

Recently announced changes to the government's Open Market HomeBuy (OMHB) scheme are a "drop in the ocean" and will do little to help first-time buyers.

That is the view of Firstrung, which describes a new £1,500 grant which has been recently made available to certain buyers as "deliberate tinkering by central government in order to encourage as many late entry first-time buyers as possible".

Housing minister Caroline Flint announced earlier this month grants of up to £1,500 would be available to those who brought property through the government's flagship OMHB.

However, the announcement was criticised as only £3 million was offered, to a very specific group of key workers.

"What you are in fact getting is a discount of about point five per cent off of the value of an overpriced property. This smacks to me of desperation at the wrong end of the property cycle," said Paul Holmes, chief executive of Firstrung.

Indeed first-time buyers have been neglected during recent house price rises, effectively priced out of the market by excessive, credit funded, lending, argues Firstrung.

The government is now seeking to appease this group, realising their importance to the market as a whole – but its shared equity plans are inadequate.

"The government is talking about offsetting up to about 50 per cent [through Open Market HomeBuy] of the cost of a home, but it won't be offset. You will still have to pay that bill at some stage. If the house falls in value over the next five years, the government won't suffer that loss, you will," said Mr Holmes.

In this light the correction in house prices seen in recent months, with the Royal Institution of Chartered Surveyors (Rics) today reporting confidence in the market has fallen to a 30 year low, may not be all bad.

"What first-time buyers want is the correction that a lot of them anticipated, which is why a lot of them stayed out of the marketplace," continued Mr Holmes.

"If the government now steps in, it's not to help first-time buyers, it is to protect the housing market and this makes this worse for the legions of disenfranchised first-time buyers."

Even government plans to build three million new homes by 2020 will not be of assistance to first-time buyers in the short term.

"I'll tell you what first-time buyers need more than anything - a moderate or a significant correction in house prices of about 20 per cent. That's the best gift that a first-time buyer can have," concluded Mr Holmes.