In his hour long speech this afternoon, Chancellor George Osborne announced a scheme to help 10,000 first-time buyers purchase new build homes by offering low-interest loans funded by the government and house builders.
Nicholas Leeming, business development director at Zoopla.co.uk, says figures from the Council of Mortgage Lenders show first-time buyers currently pay an average deposit of £25,000, which would plummet to an initial £6,250 under the scheme.
But the mortgage and property industries have reacted with mixed feelings.
Leeming said: “Any measures to help first-time buyers are welcome, particularly when they’re set to help the construction industry as well as the housing market. But Osborne’s First Buy scheme won’t go beyond scratching the surface of the problem faced by the vast majority of first-time buyers as it’s exclusively for new build properties and only around 11,000 buyers will benefit – a fraction of the overall number of potential first-timers.
“Mortgages are still required and this scheme leaves lenders, who have had a strangle hold on the market for the last two years, in a win-win situation. Being able to lend to a select group of first-time buyers without the normal level of risk makes lending to those who don’t qualify for the scheme even less attractive.
“And while the availability of credit is slowly easing, it’s not easing fast enough to help those borrowers who don’t qualify. A step in the right direction these measures may be, but they’re merely window dressing the wider problem.”
Mark Blackwell, managing director of xit2, agreed with Leeming, saying: “The move to help first time buyers is little more than a gesture and certainly won’t be market changing. The scheme does little to address the vast backlog of first time buyers who are stuck in the rental market.
“There were £46 billion of first time buyer loans in 2007 and just £24 billion in 2010 according to CML stats, while the CLG says the number of households is growing by 223,000 a year, so this barely begins to scratch the surface.”
Blackwell added that Osborne’s scheme was “not even new” suggesting it is “a direct replacement for Labour’s Homebuyer Direct Scheme”.
Rightmove director, Miles Shipside, added: “Our research has shown that the key issue for first-time buyers in the current housing market is raising a deposit, with over 44% stating this as their single biggest concern.
“The Government’s intention to assist first-time buyers in meeting lenders’ deposit requirements should be welcomed, though wider easing of lenders’ gold-plated deposit requirements is really what most who are stuck in rented accommodation are hoping for.”
Stuart Law, chief executive of Assetz, said the scheme had failed to engage with the current situation in the mortgage market properly.
He said: “Tens of thousands of first time buyers need help, and I hope the Government uses the £250million pledged to the new First Buy scheme wisely. Rather than just help 10,000 first time buyers raise 25% deposits on average, it would be sensible to help a significant number of first time buyers raise 10% deposits, since 85% and 90% LTV mortgages are available at reasonable rates.”
Others felt that shared ownership had limited appeal.
Neil Warman, chief commercial and finance officer at HML said: "Only time will tell if the scheme will be successful given the limited success of previous schemes to help people onto the housing ladder.”
