Maggie Fleming investigates the Government's new Open Market Homebuy Scheme.
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You may have read recently that the Government is worried about the fact that key workers (nurses, teachers, firefighters etc) and first time buyers generally are unable to afford homes in many parts of the country. There are several measures being proposed to make it easier for vital workers to get a foot on the property ladder. One of the latest, announced recently by Gordon Brown, is Open Market Homebuy, which should be up and running by next April.
I have friends who bought their properties through shared ownership schemes with housing authorities and Open Market Homebuy will be very similar. The details have yet to be worked out but basically first time buyers will be able to get a mortgage for a proportion – likely to be between 50% and 75% - of the property they want to buy. The rest of the equity will be owned by the Government and the lender. The buyer will pay the mortgage on their share of the property and will also pay a low rent on the part that they don’t own. As time goes by and their circumstances change, the buyer will presumably be able to increase their stake in the property to 100%.
Anything that helps first time buyers into the property market is to be welcomed but we will need to see the fine print. Some commentators have suggested that it will just push property prices up further but, considering that the scheme is only going to help 20,000 new buyers in each of the next 5 years, that is unlikely to happen. Indeed, compared with the number of people who would like to buy but simply can’t afford it, 20,000 a year seems a mere drop in the ocean.
And who exactly will qualify as a first time buyer? If you’ve never owned a property but your partner once did and you are now buying jointly, do you qualify? If you a first time buyer with a large salary who could easily afford a £300,000 home but decide you want the Government to help you buy one worth £600,000, will you qualify?
If you are one of those who might benefit from the proposals but don’t want to wait until next year, there are other schemes out there that might interest you. Some lenders offer mortgages where a parent can act as guarantor while others offer loans that start as interest only and then convert to a repayment basis after three years. Schemes like these can help you onto the property ladder.
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