New scheme for first-time buyers launched

The government has launched its Open Market HomeBuy scheme today, offering a financial boost for social tenants, key workers and priority first-time buyers to get onto the property ladder.

The scheme, which allows first-time buyers to apply for a shared equity mortgage to up their budget by as much as 25 per cent, goes on trial from today, and is expected to help around 20,000 new buyers.

This means a family on a combined income of £35,000 – typically able to afford a property up to £122,500 – would have their budget increased to £160,000 with Open Market HomeBuy.

Most importantly, buyers that make it onto the scheme will not require a deposit.

Monthly repayments will also be significantly reduced – around 20 per cent less than buying without assistance – made possible because lenders and government will also benefit from any increase in the value of their equity share in the property when it is sold.

Participants need to be able to fund 75 per cent of their purchase with a mortgage offered by one of the four lenders that have signed up to the scheme.

The additional 25 per cent comes from two equity loans from the government and the lender of 12.5 per cent of the purchase price.

Launching the scheme, housing minister Yvette Cooper commented: "We want to help more families get a first step on to the housing ladder. If you haven't got family or friends who can help it can be hard to get started.

"In the long run we need to build more homes to ease the pressure on house prices. But in the meantime this new mortgage deal will help thousands of families into a home of their own."

The four lenders signed up for the scheme are Advantage, the Yorkshire Building Society and Nationwide. The Bank of Scotland is expected to join the scheme later this year.

Andy Caton of the Yorkshire Building Society said: "We are delighted to be participating in this government initiative which is designed to help key workers in areas where house prices have spiralled out of the reach of many people."

"Whilst the trial of the new Open Market HomeBuy scheme is not designed to provide a solution to all the problems that first-time buyers have in today's market, it will give help to some of those who need it most," Mr Caton added.

The online first-time buyers' advice centre Firstrungnow.com has warned first-time buyer's not to get their hopes up about the new scheme.

The site's managing director Helen Adams warned: "Aspiring first-time buyers eagerly awaiting the government's Open Market HomeBuy scheme launched today needn't get too excited.

"Whilst the concept of making grants go further by involving the private sector is excellent, the scale and eligibility severely fall short of widespread expectations and hopes.

"Today's first-time buyers, unless they can be described as a key worker – admittedly the net has widened in this respect this year – will still need to look for a solution amongst the array of new property and mortgage 'deals' being offered or go cap in hand to their parents."

The government reports that around half of all home buyers in their twenties now rely on help from family or friends to get started.

A list of housing associations acting as agents for the scheme is available from www.communities.gov.uk
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