First time buyers are being offered a lifeline when it comes to getting on the property ladder but how will George Osborne’s First Buy scheme work? First time buyers earning £66k or less will be eligible for the scheme which will allow them to buy a home with a 5 per cent deposit. The government and the housebuilders will jointly provide a 20 per cent loan to top up first-time buyers’ own deposit. This will allow them to take out a mortgage for 75 per cent of the property.
On the face of it the scheme sounds like a good move for the housing market but in reality only a small percentage of first time buyers will be helped by this scheme and this will only ensure movement in the new homes industry. What we could really do with is a similar initiative on re-sale properties. The housing market is unlikely to improve if first time buyers are unable to secure mortgage finance on a re-sale property, allowing the seller to move on up the ladder.
Mark Blackwell, managing director of xit2, commented:
“The move to help first time buyers is little more than a gesture and certainly won’t be market changing. The scheme does little to address the vast backlog of first time buyers who are stuck in the rental market. There were £46 billion of first time buyer loans in 2007 and just £24 billion in 2010 according to CML stats, while the CLG says the number of households is growing by 223,000 a year, so this barely begins to scratch the surface. And the Chancellor isn’t committing an astronomical amount of money by any means – it will be funded evenly by the DCLG and the house builder. It’s not even a new scheme, it’s a direct replacement for Labour’s Homebuyer Direct Scheme”
Whilst Steve Lees, Director at SmartNewHomes, who was a little more positive about the scheme, commented:
"Finally, some good news for the house building industry, the sector has been stifled by the lack of funding available to first time buyers who are currently unable to raise the large deposits required by lenders, but the fact that First Buy is targeted only at new homes means that the stagnation at the bottom of the market will be eased. This will enable house builders to build more, providing a significant boost to the sector and potentially creating thousands of new jobs.
This is not a long term solution, as the scheme will only help 10,000 buyers, but alongside the many shared equity schemes already offered by developers, we are hopeful it will have a real impact.”
Who knows if the First Buy scheme will work and stimulate the housing market but it is surely a step, albeit a small one, in the right direction. It does not matter if a goal is reached with a big step or by many little steps. What matters is that you get there in the end.
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