£250m boost for first-time buyers

First-time buyers struggling to raise a deposit received a boost today with the announcement of a new scheme to help them get on to the property ladder.

The Government has earmarked £250 million from the Bank Levy to help around 10,000 households with incomes of up to £60,000 buy a new-build property.



Under the FirstBuy initiative, buyers must save a deposit worth 5% of their property's value, with the Government and housebuilders putting up 10% each through an equity loan, enabling people to qualify for 75% loan-to-value mortgage.



The equity loan will be interest-free for the first five years, with interest charged at 1.75% in year six, and at inflation plus 1% thereafter.



The Government hopes the scheme will also provide a boost to the construction industry and support up to 50,000 jobs, after the number of new homes that were built fell to their lowest peacetime level since 1923 last year.



The initiative is almost identical to the Homebuyer Direct scheme that was launched by the previous government in 2009, under which the government and housebuilders provided equity loans totalling 30% of a property's value.



Around £275 million of funding was made available for Homebuyer Direct and it has helped 9,000 people to buy their first home.



The Council of Mortgage Lenders welcomed the announcement, saying it would provide "modest help" for first-time buyers.



A spokeswoman said: "Every little helps, but it is not going to fundamentally change the landscape."



First-time buyers have been struggling to get on to the property ladder since the credit crunch struck and lenders began to demand large deposits in order for people to qualify for the best rates.



Just 194,600 people bought their first home with a mortgage in 2010, well down on the more than 500,000 people who got on to the property ladder each year during the late 1990s and early part of the last decade.



First-time buyers are currently putting down deposits that average around 20% of their property's value, while the average age at which people who do not receive parental help to buy their first home has risen to 31.



Housing Minister Grant Shapps hosted a summit earlier this year in which he called on lenders to do more to help struggling first-time buyers, through product innovation and initiatives to boost shared ownership and shared equity loans.









The Home Builders Federation welcomed the announcement, saying: "Introducing FirstBuy is a vital and extremely positive move to help thousands of potential first-time buyers currently being thwarted by the chronic lack of mortgage availability.



"The HBF has long campaigned for the introduction of this measure which will also ensure more homes are built, providing a much-needed economic boost to local economies up and down the country and creating tens of thousands of jobs."



But other commentators were less optimistic about the impact of the scheme.



Campbell Robb, chief executive of housing charity Shelter, said: "This first-time buyers' package is the policy equivalent of a sticking plaster on a broken leg, and will have little impact on our housing crisis.



"In fact today's announcement will help less than 1% of those struggling to get on the housing ladder, leaving them more likely to win a prize on the lottery than be helped through this small-scale scheme."



David Whittaker, managing director of Mortgages For Business, said: "The pool of buyers that qualify for the Government's FirstBuy scheme is so small you couldn't even have a bath in it. If the Government thinks this is going to transform the property market they're mad."



Nicholas Leeming, business development director at Zoopla.co.uk, said: "Osborne's FirstBuy 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."



David Toplas, chief executive of the Investors in Housing Fund at Mill Group, said "The Chancellor's Budget announcement of support for first-time buyers is encouraging, but is a drop in the ocean that fails to address the sheer scale of the problem."











The new scheme was welcomed by housebuilder Barratt Developments' chief executive Mark Clare, who described it as "exactly the tonic the housing market needed".



David Orr, chief executive of the National Housing Federation, said: "First-time buyers have effectively been locked out of the housing market since the credit crunch by the mortgage drought.



"This scheme will offer first-time buyers on moderate incomes a much needed helping hand towards buying an affordable home and is a very welcome move."



Ian Fletcher, director of policy at the British Property Federation, said: "This package broadly makes sense, because it targets home deposits, and is about as much as the Government could realistically do in current circumstances."



Mr Osborne also said he would extend the temporary changes to the Support for Mortgage Interest scheme until January 2013.



The move means that people will continue to have to wait for only 13 weeks before they receive assistance under the scheme, which will cover mortgages of up to £200,000, and should reduce arrears for around 100,000 out-of-work homeowners.

Discover more property articles at Homes and Property
Voices
Lucerne’s Hotel Château Gütsch, one of the lots in our Homeless Veterans appeal charity auction
charity appeal
Arts and Entertainment
Tony Hughes (James Nesbitt) after his son Olly disappeared on a family holiday in France
tv
News
people

Jo from Northern Ireland was less than impressed by Russell Brand's attempt to stage a publicity stunt

Sport
Scunthorpe goalkeeper Sam Slocombe (left) is congratulated by winning penalty taker Miguel Llera (right)
football
PROMOTED VIDEO
Arts and Entertainment
Jennifer Saunders stars as Miss Windsor, Dennis's hysterical French teacher
filmJennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress
Sport
Nabil Bentaleb (centre) celebrates putting Tottenham ahead
footballTottenham 4 Newcastle 0: Spurs fans dreaming of Wembley final after dominant win
Life and Style
tech
Voices
Jimmy Mubenga died after being restrained on an aircraft by G4S escorts
voicesJonathan Cox: Tragedy of Jimmy Mubenga highlights lack of dignity shown to migrants
Life and Style
Sebastian Siemiatkowski is the 33-year-old co-founder and CEO of Klarna, which provides a simple way for people to buy things online
tech
Property search
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.

iJobs Job Widget
iJobs General

Ashdown Group: Helpdesk Analyst

£25000 per annum: Ashdown Group: An established media firm based in Surrey is ...

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Head of Finance - Financial Director - London - £70,000

£70000 per annum: Ashdown Group: Head of Finance - Financial Controller - Fina...

Recruitment Genius: Business Development Executive - Nationwide - OTE £65,000

£30000 - £65000 per annum: Recruitment Genius: This small technology business ...

Day In a Page

Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas
La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

Deaf community outraged by La Famille Bélier

The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
10 best high-end laptops

10 best high-end laptops

From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
Susie Wolff: A driving force in battle for equality behind the wheel

Susie Wolff: A driving force in battle for equality behind the wheel

The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

'No abs Adam' plans to muscle in on Usain Bolt's turf

After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
Calls for a military mental health 'quality mark'

Homeless Veterans campaign

Expert calls for military mental health 'quality mark'
Racton Man: Analysis shows famous skeleton was a 6ft Bronze Age superman

Meet Racton Man

Analysis shows famous skeleton was a 6ft Bronze Age superman
Garden Bridge: St Paul’s adds to £175m project’s troubled waters

Garden Bridge

St Paul’s adds to £175m project’s troubled waters
Stuff your own Christmas mouse ornament: An evening class in taxidermy with a festive feel

Stuff your own Christmas mouse ornament

An evening class in taxidermy with a festive feel
Joint Enterprise: The legal doctrine which critics say has caused hundreds of miscarriages of justice

Joint Enterprise

The legal doctrine which critics say has caused hundreds of miscarriages of justice
Freud and Eros: Love, Lust and Longing at the Freud Museum: Objects of Desire

Freud and Eros

Love, Lust and Longing at the Freud Museum