The government’s FirstBuy initiative is a the drop in the ocean in terms of how many first-time buyers it will help, say mortgage trade bodies.
Chancellor George Osborne announced the £250m scheme in last week’s Budget. He estimates it will help 10,000 first-time buyers pur-chase a newly-built property.
Under the scheme buyers will have to put down a 5% deposit, while the government and home builder each put in 10% in the form of a low-cost loan.
The loans will be interest-free for five years and then charged at around 1.75%, rising by 1% above inflation each following year.
Peter Williams, executive direc-tor of the Intermediary Mortgage Lenders Association, says the scheme is a step in the right direction but urges the government to address the underlying mortgage funding drought.
He says: “The govern-ment must see FirstBuy as one of a number of mecha-nisms to help the mortgage and housing markets as it will have little impact in isolation.
“Osborne estimates it will help around 10,000 borro-wers, but that would only equate to a 5% rise in the number of loans to first-time buyers compared with 2010.”
He would like to see the govern-ment properly address the funding issue in the mortgage market and better support the wholesale funding sector.
Robert Sinclair, director of the Association of Mortgage Interme-diaries, says the move will only aid a small number of buyers and the government should be wary of helping to shift new-build properties that have been hard to sell.
He says: “The problem we face is lenders saying that funding is available and brokers struggling to get customers through their stringent lending criteria.
“The Budget is a missed opportunity to ensure more lending from both state-owned lenders and those that may benefit from the FirstBuy scheme.”