The Government's Open Market HomeBuy (OMHB) scheme, designed to help those who are least able to purchase their first home, is a year old on 2 October.
It was launched amid great fanfare but the scheme has yet to hit the high notes. Mortgage industry sources have told The Independent on Sunday that fewer than 5,000 people have take advantage of OMHB so far.
Official figures have yet to be released, but when they are, it is unlikely they will have made much of a dent in the Government's target of 120,000 people using OMHB and other shared-equity initiatives by 2010.
"The problem is that OMHB, although a very good idea, is poorly publicised and confusing," says Helen Adams, director at property advice website firstrungnow.com. "People have heard of housing associations and shared-ownership schemes but not this."
To qualify for OMHB, first-timers have to be "key workers", such as nurses or teachers, social housing tenants or "priority first-time buyers". If they do fall into one of these categories, they will need to contact the nearest of the Government's 23 HomeBuy Agents, most of which are based in the South-east, where prices are highest. They will then be passed on to a mortgage broker and finally to a len- der participating in the scheme – either the Halifax, the Nationwide or Yorkshire building societies, or Advantage (part of Morgan Stanley).
But, say experts, the Government needs to ask itself who OMHB is really setting out to help. "The [local housing need] might well differ from area to area, so the criteria of the different HomeBuy Agents should change accordingly," says Caroline Havers, a partner at law firm Salans.
"For example, in cities where there are staffing problems in hospitals, the scheme should just apply to key workers. And in rural areas where 'second homers' have pushed up the price of property, the criteria should perhaps just include young people who grew up there. Although the scheme is laudable, the criteria, as they stand, are vague."
The complexity of the scheme might not help either. To bridge the affordability gap, the buyer only needs to qualify for a mortgage of 75 per cent of the property value; this deal ties him in for five years. The other 25 per cent, known as the "equity loan", is stumped up in equal measure by the Government and one of the four participating lenders. That 25 per cent share remains their joint property, although there are opportunities for the homeowner to buy back stakes.
At the end of the five years, the buyer can either remortgage or sell. In either case, both lender and government reclaim their relative percentages, making a profit if prices have risen.
OMHB also suffers from the limited number of len- ders taking part, and therefore from a small range of mortgages. For example, Yorkshire offers the only fixed-rate deal; the others are trackers, priced around 1 per cent above the Bank of England base rate.
At first glance, interest rates on OMHB deals look expensive. Yorkshire's fix is pegged at 6.89 per cent, and if you opted for a tracker, you would pay 6.75 per cent. But first-timers need to consider the big picture, says Ray Boulger at broker John Charcol. "Compared to the price of 100 per cent mortgages, the fixed rate is very reasonably priced. You are also only paying interest on a 75 per cent mortgage," he argues. "And even though you don't own the other 25 per cent, you are not paying rent on it, like you would to a Housing Association under alternative shared-ownership schemes."
The popularity of OMHB could grow as a result of a reform announced recently by the Government. First-timers who meet the HomeBuy criteria will be able to take a 17.5 per cent interest-free equity loan from the Government and choose any lender to fund the other 82.5 per cent with a standard mortgage. "This is a better deal and may prompt other lenders to look at joining the scheme," says David Hollingworth at broker London and Country. But for now, he adds, OMHB is "a last resort to get on the ladder."Reuse content