06 October 2006
A new scheme to help key workers and other first-time buyers purchase homes on the open market was launched this week.
Buyers will in future be given the opportunity to take out equity loans with high-street lenders as well as government loans.
According to the Department for Communities and Local Government, this will mean a family with a joint income of £35,000 could afford a property worth more than £160,000, compared with a £122,500 home under normal circumstances.
Since the turn of the decade, 21,500 people have bought homes with the help of government equity loans. Ministers are predicting that a further 20,000 will join the property ladder through Open Market HomeBuy.
The scheme is backed by four major lenders - Advantage (part of Morgan Stanley), Bank Of Scotland, Nationwide and Yorkshire Building Society. In addition to offering regular mortgages for 75% of the home, lenders will provide equity loans covering 12.5% that must be repaid within five years to avoid charges. Government HomeBuy agents will organise equity loans for the remaining 12.5%.
The scheme, launched on October 2, is open to key workers, council and housing association tenants and priority groups identified by regional housing boards.
David Orr, chief executive of the National Housing Federation, said the scheme must be linked to increased house building to avoid further inflating the housing market.
A new study by the NHF and the Chartered Institute of Housing shows the average house price in Southeast England will exceed £322,000 by 2011.The number of new households in the region is forecast to rise by 37,000 per year.
'Our research shows that the average house price is set to soar to £300,000 by 2011, becoming unaffordable to still more potential first-time buyers,' he said.
Open Market HomeBuy is one of three low-cost ownership schemes promoted by the DCLG. Social HomeBuy encourages council and housing association tenants to buy shares in their existing home, while New Build HomeBuy enables first-time buyers to part-purchase a new property.
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