Mortgage expert Jonathan Cornell has branded the government’s mortgage rescue plan offering first-time buyers interest-free 30% loans to buy new-build properties dangerous and short-sighted.
The £300m scheme forms part of a £1bn plan unveiled last week to tackle the challenges posed by prevailing conditions in the housing market.
The 30% equity loans will be jointly funded by the government and private developers.
Other initiatives in the package in-clude a scheme that will allow councils to buy properties from vulnerable borrowers who can then continue to live in their homes as part-owners or tenants. Councils will also be awarded £400m to further develop social housing.
Other reforms include a Stamp Duty holiday and changes to the Income Support for Mortgage Interest programme.
Cornell, managing director of Hamptons Mortgages, is concerned because the shared equity programme, dubbed HomeBuy Direct, is available only for new-build properties and to first-time buyers earning less than £60,000 a year.
Cornell says the scheme is ridiculous and will divert buyers into the new-build market just as len-ders withdraw due to fears about the incentives offered by developers.
He says: “It’s a shame to limit HomeBuy Direct to the new-build market as it takes buyers out of sales chains. Concentrating on this sector is dangerous and short-sighted.”
David Nicholson, director of Bedford-based brokerage D&D Consultants, says: “If the scheme had been broadened the effect would have been terrific, but as it is this move will stagnate the market not kick-start it.”
The government’s mortgage rescue plan came hot on the heels of chancellor Alistair Darling’s confession in the Guardian that the economy is at a 60-year low and the public is “pissed off” with Labour.
There was also a gloomy forecast from the Organisation for Economic Cooperation and Development, which claimed that the UK is the only G7 economy facing recession by the end of this year.