The Treasury has confirmed that the shared equity element Help to Buy scheme, which was announced by the chancellor George Osborne in his Budget last week, will replace the existing FirstBuy scheme when it comes into effect in 2014.
But the existing NewBuy will continue to run parallel to the Mortgage Indemnity Guarantee proposals.
A Treasury spokeswoman says: “The equity loan part of the Help to Buy scheme will replace FirstBuy. The second part, the mortgage guarantee part will not replace NewBuy. NewBuy will run until 2015. NewBuy is only for new build whereas the MIG scheme will be available for any new or old properties.”
Association of Mortgage Intermediaries chief executive Robert Sinclair says having the existing scheme run alongside another with slightly different criteria will create problems
He says: “I do not think it would be helpful. It causes total confusion.”
In terms of intermediaries’ access to the Help to Buy scheme, experts predict that it will be similar to the current situation with a FirstBuy and NewBuy.
Mortgage Advice Bureau new homes director Andy Frankish says the shared equity opportunities will remain restrictive and many brokers will find themselves locked out.
He says: “The problem is, and I think this will happen with Help to Buy, you cannot open it up to the whole of the market. You have to control it in some way and there will be some sort of application process around this. Whether people think it is right or wrong, that is the way they will try to control this scheme.”
Sinclair also says the scheme has the capacity to prove restrictive but attempts to remedy that would violate a firm’s right to do business.
He says: “This is effectively going to be a builder application thing, it is how builders decide they want to deliver the product to market. They could go direct to lenders but they tend to use specific brokers with the experience to understand the product.
“There are ways of changing that but, to open up to the market as a whole but we cannot interfere with what are commercial contracts between firms. If we are forcing the scheme to go down a particular route, I would be very uncomfortable. Firms have the right to do deals with who they want.”
The Council of Mortgage Lenders has raised its own concerns, releasing a statement that demands capital relief on higher LTV loans if the scheme is to prove economically sound.
It says: “Without capital relief, and depending on the size of the fee, the cost of the commercial fee that lenders will have to pay to gain the benefit of the scheme could make the scheme uneconomical.”