Things look brighter for first-timers

Help is at hand, not only from the Government but also from builders and lenders, says Stephen Pritchard

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.

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Admin Assistant

    £12000 - £15000 per annum: Recruitment Genius: An expanding Insurance Brokerag...

    Ashdown Group: Editor-in-chief - Financial Services - City, London

    £60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Guru Careers: Pricing Analyst

    £30 - 35k (DOE): Guru Careers: We are seeking a Pricing Analyst with experienc...

    Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

    £24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Day In a Page

    Revealed: Why Mohammed Emwazi chose the 'safe option' of fighting for Isis, rather than following his friends to al-Shabaab in Somalia

    Why Mohammed Emwazi chose Isis

    His friends were betrayed and killed by al-Shabaab
    'The solution can never be to impassively watch on while desperate people drown'
An open letter to David Cameron: Building fortress Europe has had deadly results

    Open letter to David Cameron

    Building the walls of fortress Europe has had deadly results
    Tory candidates' tweets not as 'spontaneous' as they seem - you don't say!

    You don't say!

    Tory candidates' election tweets not as 'spontaneous' as they appear
    Mubi: Netflix for people who want to stop just watching trash

    So what is Mubi?

    Netflix for people who want to stop just watching trash all the time
    The impossible job: how to follow Kevin Spacey?

    The hardest job in theatre?

    How to follow Kevin Spacey
    Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

    Armenian genocide and the 'good Turks'

    To continue to deny the truth of this mass human cruelty is close to a criminal lie
    Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

    'Lou needed care, but what he got was ECT'

    The truth about the singer's upbringing beyond
    Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

    This human tragedy has been brewing for years

    EU states can't say they were not warned
    Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

    Women's sportswear

    From tackling a marathon to a jog in the park, the right kit can help
    Hillary Clinton's outfits will be as important as her policies in her presidential bid

    Clinton's clothes

    Like it or not, her outfits will be as important as her policies
    NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

    Who's monitoring the outsourced NHS services?

    A report finds that private firms are not being properly assessed for their quality of care
    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
    How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

    How do Greeks feel about Syriza?

    Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
    From Iraq to Libya and Syria: The wars that come back to haunt us

    The wars that come back to haunt us

    David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
    Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

    Too busy to surf? Head to The Pool

    A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders