Mortgages. First-time buyers shouldn’t bother waiting for the government’s Homebuy scheme.

In 2005, Gordon Brown made the announcement that the government would be introducing a new “Open Market Homebuy” mortgage scheme that would help support first-time buyers. The scheme addresses the problems for first time buyers affording property in the inflated housing market, and enables them to get a mortgage for 75 of a home’s value with no deposit. The government and the mortgage lender take over the remaining 25, and the borrower has the option to either buy that 25 at some point, or simply forget about it. And 25 of the sale price will go back to the government/mortgage lender. There would be no penalty either way.The scheme sounds very exciting, because it’s getting the deposit together, and having high enough salaries to borrow a large amount that is preventing first time buyers from getting onto the property ladder. However, we feel that the scheme may not be all it’s cracked up to be – and here’s why: •The Government announced recently that buyers on the scheme will have to pay an extra 1 on their mortgage interest rate compared to regular borrowers.•No details have been given about what multiples of borrowers’ salaries will be set. So first time buyers can’t start looking at houses yet, they have no idea how much they’ll be able to borrow! In the current housing market, we imagine that they will still be looking at the smaller properties.•Only the Halifax, Yorkshire Building Society and the Nationwide have signed up to help sponsor the Homebuy scheme. None of the other lenders have decided to join the scheme. •The Government has stated that they expect the Homebuy scheme to help out only 4,000 borrowers in the first year. Taking into account the fact that 361,000 first time house purchases are made every year, that’s only 1 of the total! In anyone’s terms, that is not a successful scheme – it hardly helps anyone. •The Government has provided no details about what criteria will exist for first time buyers to qualify for the scheme – so everyone is still in the dark. •The scheme is apparently going to start up in October 2006 – that’s a long time for a first time buyer keen to buy a house to wait. It’s not looking good for the first time buyer. An extra 1 on mortgage rates, and no information about whether you will even be eligible to join the Open Market Homebuy mortgage. We think that first time buyers would be better off forgetting about the scheme, and should instead find a good insurance broker who will get you the best mortgage deal. We’re not alone with our reticence. Michael Grove, shadow housing minister recently told the Sunday Telegraph that he wanted more mortgage lenders to participate in the scheme, by making the Homebuy scheme easier and cheaper for the lenders. As far as we’re concerned, we don’t even know what the scheme is all about – there’s nothing for the lenders to participate in! Unless of course, they know something we don’t. For the meantime, the scheme is dead in the water.

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