£250m plan to get first-time buyers on to property ladder
First-time buyers struggling to raise a deposit received a budget boost with the announcement of a new scheme to help them get on to the property ladder.
The Government has earmarked £250m from the Bank Levy to help around 10,000 households with incomes of up to £60,000 buy a new-build property.
Under the FirstBuy initiative, buyers must save a deposit worth five per cent of the property’s value, with the Government and housebuilders putting up 10 per cent each through an equity loan, enabling people to qualify for 75 per cent loan-to-value mortgage. The equity loan will be interest-free for the first five years.
The Government hopes the scheme will also provide a boost to the construction industry and support up to 50,000 jobs, after the number of new homes that were built fell to their lowest peacetime level since 1923 last year.
The initiative is almost identical to the Homebuyer Direct scheme that was launched by the previous government in 2009. Around £275m of funding was made available for that project and it has helped 9,000 people to buy their first home.
The Council Of Mortgage Lenders welcomed the announcement, saying it would provide ‘modest help’ for first-time buyers.
A spokeswoman said: “Every little helps, but it is not going to fundamentally change the landscape.”
Claire Jarvis, sales manager for Persimmon Homes North West, said: “We recognise how important first-time buyers are in sustaining the property market and the prediction that FirstBuy is expected to help 10,000 families get on to the property ladder is welcome.”
John Cosgrave, managing director of Warrington-based, Arley Homes, said the policy will be some benefit to the market as a whole but would not impact Arley directly:
“The Government has made a commitment to help get the market moving, which is something we have long been calling for, and I’m glad to see it comes in the form of practical support for first time buyers who are in desperate need of help and are the foundation blocks of the housing market.
“My concern is that a £250m fund targeting around 10,000 buyers will have a fairly limited impact when you consider the BBC reports there were 347,000 first time buyers in 2010, and that itself down from 700,000 in 2004/5. I would rather see such a policy extended to all first time buyers, not just those buying new build homes, in order to support the wider market recovery.
“However, this will probably not affect Arley directly as we didn’t resort to its predecessor, the Homebuy scheme, and have our own successful five per cent deposit match scheme to help first time buyers. As ever, the devil will be in the detail and the success of the scheme will ultimately depend on the banks relaxing their lending on mortgages, a much more important issue on which we would like to see Government intervention.”
Simon Rubinsohn, chief economist of the Royal Institution of Chartered Surveyors, said: “Opening up the housing market to first-time buyers will be essential to support economic growth. The lack of mortgage lending has significantly reduced the number of homes being bought and sold, which in turn has led to low housebuilding levels.
“Although it is not a solution to all housing problems, this could represent the first step towards a sustainable property market and assist the economic recovery.”
Source: Manchester Evening News