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Solution that could make things worse

Arguably, the climate has never been tougher for first-time buyers. But the government’s latest initiative – its expanded shared equity scheme, Open Market Homebuy – could end up aggravating the problem it was set up to help solve.

The scheme was initially designed to help key workers such as nurses and policemen get on the property ladder but was extended last month to help other groups such as first-time buyers. It has already come under fire for being too complex and barely scratching the surface of the affordability crisis that threatens the housing market.

The most damaging attack of all is that it could make things worse for first-time buyers excluded from the scheme by artificially stimulating demand and accelerating house price rises.

So far, only four lenders have committed themselves to the scheme – Advantage, Bank of Scotland, Nationwide and the Yorkshire.

So what incentives are there for brokers to get involved? The government suggests that brokers have a key role in ensuring HomeBuy customers get the most suitable financial products, plus the usual financial incentive of the proc fee – typically set at 0.35% calculated on 87.5% of the asking price.

The scheme will help 40,000 buyers – a tiny fraction of the one million housing transactions that take place in the UK every year. And first impressions suggest it will not prove all that lucrative for brokers.

Applicants are likely to have low incomes and borrowings, which limits the money brokers can make from fees. But brokers should consider these clients as long-term prospects to whom they can cross-sell additional products such as income protection or critical illness cover.

Initiatives to help first-time buyers should always be considered but there are plenty of doubts about this latest development, not the least of which being that it might be better to let the market get back to a level that people can afford.

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