The Open Market HomeBuy scheme has had several incarnations, all aimed at improving buying opportunities for key workers.
The government has been dynamic in bringing complex schemes to market in a relatively short space of time and although affordable options have long been available through housing associations, a wider initiative was needed.
Using equity loans allowed the Department for Communities and Local Government to ex-tend the opportunities to buy property on the open market to applicants meeting certain criteria. This was vital to allow teachers and nurses to buy where they wanted while still receiving government support.
Of course, the scheme came in for criticism, most of which has stemmed from the small number of borrowers who took advantage of it.
To try and help more people, the government called for lenders to come on board and participate in equity loans to spread government funds. It stood to reason that if lenders and government went 50/50, twice as many consumers would benefit.
But only a few lenders stepped up, including Nationwide, the Yorkshire, Halifax and Advantage. This was new ground, with mainstream lenders taking equity stakes in property rather than simply charging interest.
It’s no surprise that the two new schemes also centre on equity loans, albeit substantially higher than before, but now there is only one len-der involved.
Co-operative Bank is the government’s partner in the Ownhome scheme, which offers 40% equity loans interest-free for the first five years, the remainder funded by Co-op mortgages.
Meanwhile, the MyChoice HomeBuy scheme offers up to 50% equity loans and the ability to seek mortgage funding from any lender, but the loan attracts interest of 1.75% from day one.
What is surprising is that the lenders that have been at the centre of the HomeBuy initiative for years are no longer involved. There are two possible reasons for this – the lenders weren’t interested in continuing or they were dropped.
Given the government’s history of using commercial organisations to implement its plans only to change its mind, the latter could well be the case. If so, perhaps we’ll see one of those lenders getting into shared equity soon.
The new government schemes could be more successful than previous ones if the marketing is done properly, and that means recognising the important role brokers can play.