BUDGET 2011: Osborne to help first-time buyers
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George Osborne is expected to announce a £250m package to help first-time buyers in today’s Budget.
The First Buy scheme is designed to help 10,000 first-time buyers purchase a newly built flat or house.
The buyer will have to put down a 5% deposit, while the government and home builder would both put up 10%in the form of a low-cost loan from the government and the builder, resulting in a 25% deposit.
It will be funded by the Department of Communities and Local Government and the house builder.
The scheme is designed for those with joint incomes of less than £60,000 and the loans will be interest-free for five years and then charged at around 1.75%, rising by 1% above inflation each following year.
Richard Sexton, business development director of e.surv, says yesterday’s inflation figures cast a dark shadow over the budget, which provides little relief for potential homebuyers.
He says: “Household budgets have been pillaged by inflation but the Chancellor had little scope to offer any meaningful respite to either homebuyers or homeowners.
“The help for first-time buyers provides some small relief, particularly for parents who are dipping into savings to help children fly the nest.
“First-time buyers are a fundamental part of the housing market and are largely absent at present, with their place being taken by cash rich investors who can outcompete them for bottom end property.
“Unlocking this end of the market will ultimately generate more transactions through the chain, provided that other budget measures don’t so severely curtail ability to buy that the effect is completely negated.”
Nicholas Leeming, business development director at Zoopla.co.uk, says any measures to help first-time buyers are welcome, particularly when they’re set to help the construction industry as well as the housing market.
But he says: “According to the CML, first-time buyers currently pay an average deposit of £25,000, this would plummet to an initial £6,250 - a very appealing prospect.
’But Osborne’s First Buy scheme won’t go beyond scratching the surface of the problem faced by the vast majority of first-time buyers as it’s exclusively for new build properties and only around 11,000 buyers will benefit - a fraction of the overall number of potential first-timers.
“Mortgages are still required and this scheme leaves lenders, who have had a strangle hold on the market for the last two years, in a win-win situation. Being able to lend to a select group of first-time buyers without the normal level of risk makes lending to those who don’t qualify for the scheme even less attractive. And while the availability of credit is slowly easing, it’s not easing fast enough to help those borrowers who don’t qualify.
’A step in the right direction these measures may be, but they’re merely window dressing the wider problem.”
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Readers' comments (14)
Martin Hall | 23 Mar 2011 10:13 am
How crazy is this?Subsidy from the taxpayer to keep house prices high.Far better to let the market dictate lower prices and then perhaps the Lenders wont be so afraid of lending at higher loan to value
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Gideon Little | 23 Mar 2011 10:15 am
I was never very good at maths, but by my calculations the proposed new FSA MMR rules would mean that these loans would not be affordable after about 7 or 8 years, bearing in mind the target market. Surely the govenment isn't betting on house price appreciation?!!
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Cleeve Exile | 23 Mar 2011 10:18 am
Surley this would just tempt housebuilders to inflate house prices to recoup their margin and thus cause negative equity at the time of resale. After all it is stil a 95% LTV purchase.
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Cleeve Exile | 23 Mar 2011 10:18 am
Surley this would just tempt housebuilders to inflate house prices to recoup their margin and thus cause negative equity at the time of resale. After all it is stil a 95% LTV purchase.
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John Lacy | 23 Mar 2011 10:25 am
Spot on Martin---if successive administrations stopped chasing short term PR brownie points and let the market settle the prices it would sort itself out---The only interference that makes sense is to put a cap on borrowing as a percentage of disposable income to stop the lenders repeating past mistakes
Gideon--I absolutely love the idea of using the FSA rules to stop the government and builders colluding to rip off even more people
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John Lacy | 23 Mar 2011 10:25 am
Spot on Martin---if successive administrations stopped chasing short term PR brownie points and let the market settle the prices it would sort itself out---The only interference that makes sense is to put a cap on borrowing as a percentage of disposable income to stop the lenders repeating past mistakes
Gideon--I absolutely love the idea of using the FSA rules to stop the government and builders colluding to rip off even more people
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A Has Been | 23 Mar 2011 10:27 am
Crucify the youngsters!!
They have to pay :-
1.High mortgages
2. Tuition fees
3. Boomers pensions
4. Boomers healthcare
Glad I'm not young, I feel so sorry for them
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AA | 23 Mar 2011 10:38 am
Its good to see the government trying to address the first time buyer market. It needs a push and so do 95% mortgages.
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Mark | 23 Mar 2011 10:54 am
The £60,000 threshold is a joke. My girlfriend and I are earning marginally more than this in London, yet because of the high costs of rent, or high train fares if we commute in, we are no better off than our friends who work and live outside of the City on lesser salaries. Yes, we are lucky to be earning more than the threshold, but imposing this presupposes that someone earning £59,000 is more deserving of help from the Government than the person earning £61,000, which obviously is not the case.
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Anonymous | 23 Mar 2011 11:04 am
Can't wait to see the paperwork that will be required, Lender, Govt and Builder...and also the lenth of time this will take to put together..
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