Things look brighter for first-timers

Help is at hand, not only from the Government but also from builders and lenders, says Stephen Pritchard
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Hard-pressed first-time buyers have reason to thank Gordon Brown. The Chancellor raised the threshold for stamp duty in his most recent Budget, and has now gone on to announce a new, Government-backed shared-ownership scheme to help newcomers to the housing market.

Hard-pressed first-time buyers have reason to thank Gordon Brown. The Chancellor raised the threshold for stamp duty in his most recent Budget, and has now gone on to announce a new, Government-backed shared-ownership scheme to help newcomers to the housing market.

The changes to stamp duty land tax - doubling the initial threshold for the tax from £60,000 to £120,000 - will be welcomed by anyone buying their first home in that price bracket. But housing market experts would like to have seen the measure go further, not least because the average property now costs £180,000.

The stamp duty changes have the benefit of being effective immediately; the shared-ownership reforms will not come into effect until some point next year. From details so far, the Government appears to be planning to help first-time buyers by taking a direct stake in their properties, and then renting that stake to the occupant at a subsidised rent.

The Government also plans to work to ensure that banks and building societies are prepared to lend on homes bought through the scheme. It also hopes to persuade lenders to accept a lower rate of return from the new shared-ownership mortgages than on standard loans, further reducing the cost to first-timers.

As yet, though, the Treasury has not explained exactly how the scheme will work, or who will be eligible. Mortgage subsidies are already on offer for key workers, including teachers and nurses, but there are many other young professionals who are struggling to buy property, especially in the South-east.

Helen Adams, director of first-time buyer advice site FirstRungNow, says the average age of first-time buyers is 34; before the recent property boom, first-time buyers were usually in their twenties. The need to service larger mortgages, to save a deposit, and to clear debts, especially those that built up during university, all lie behind the trend.

For a buyer who wants to enter the property market now, waiting for the Government's new shared-ownership scheme poses risks. Chief among these is the chance that house-price inflation will resume. There is also the argument that, by continuing to rent, would-be first-time buyers are missing out on a chance to build up an equity stake.

But housing associations already offer shared-ownership schemes, including direct part-purchase of a housing association flat or house, and "DIY" shared ownership. Here, a housing association puts up part of the cost of a house purchase, in return for an equity stake.

The largest change in the market recently has come from private developers. FirstRungNow estimates that the number of private house builders offering shared ownership has increased by 74 per cent. Planning controls require developers to offer "affordable" housing, as well as a need to sustain the first-time buyer market. Eligibility for private developers' schemes is generally wider than for housing association programmes.

Mortgage lenders have also moved to help first-time buyers, by being more flexible towards different ways of buying property. More lenders are now willing to grant mortgages with higher income multiples to first-time buyers.

Banks and building societies are now more welcoming to borrowers who want to buy with friends, or with parents owning either a share of the property or acting as a guarantor. Bradford & Bingley found in a recent survey that 16 per cent of first-time buyers borrowed money from family members for their purchases, and one in 10 bought jointly with parents or other relatives. But a growing number of first-time buyers are having to opt for 100 per cent mortgages, in order to start out on the housing ladder.

"The worry about waiting to build up a deposit is that prices could rise again," says Helen Adams. And buyers who act now will be in a good position, should the Government's new scheme - as many market commentators expect - cause house prices to rise once again.

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