Get new-build funds to first-time buyers

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GRAHAM FELSTEAD HEAD OF INTERMEDIARY CHANNEL ROYAL BANK OF SCOTLAND

Prospects for the new-build sector of the housing market are expected to improve this year.

The government is keen for new-build to prosper, having committed £443m in the first two rounds of its Kickstart initiative to get mothballed schemes finished.

And to help first-time buyers to purchase these new-build properties, the Homes and Communities Agency is continuing to fund HomeBuy Direct, which enables people to get a low-interest loan to use as a deposit.

The scheme, which targets key workers with household income of less than £60,000, offers opportunities for brokers to get funding to first-time buyers.

It is useful to examine HCA data that profiles successful HomeBuy Direct applicants from April to November 2009.

The data on deposits shows 48% had none, with 35% able to provide less than £5,000. Only 7% had more than £5,000. But as most lenders now need a minimum 5% deposit, this data is likely to change for 2010.

The median income of the lead applicant was £23,212, which is 10% below the national figure for someone in full-time employment, with the median household income at £31,299.

Despite earning on average 2.6% less than a typical first-time buyer, applicants buy properties that are on average 15% more expensive and 7% larger – reflecting the fact they are new-build.

The average mortgage loan size is £106,672 – 7% higher than the mean for first-time buyers.