Gordon Brown, Chancellor of the Exchequer, unveiled plans in his pre-budget report to make
mortgages more affordable for first-time buyers. Following months of negotiation with top
lenders, shared
equity schemes could become far more common.
The government's Homebuy scheme has recently been joined by
Nationwide, HBOS and the Yorkshire Building Society.
Shared equity allows
first-time buyers to raise a percentage of equity on a
house, with the rest owned by the government and a
mortgage lender. Split estimates could be in the region of 60-20-20, with other sources indicating 75-12.5-12.5. The Homebuy scheme is intended to eventually result in hundreds of thousands of affordable first-time homes.
Early indications are that the scheme has been welcomed by first-time
buyers hungry to get on the
property ladder, but so far unable to due to high house prices.
Abbey, a major
mortgage lender, pulled out of the scheme a few months ago, denouncing it as being of limited use and non cost-effective.
Early criticism has already come from the Royal Institute of Chartered Surveyors, who perceive the scheme as being too small to have any real impact on first-time buyers. The scheme, they said, would only help less than half of 1% of transactions per annum.
The government's scheme is certainly ambitious, and a step in the right direction. However, whether it is large enough to have any impact on general affordability remains to be seen.
