Property: The first rung is the hardest

Property prices may be falling, but first-time buyers are still struggling to enter the market. Ginetta Vedrickas rounds up what help is at hand to get you on the ladder

Property prices may finally be stalling, but first-time buyers are still finding it tough. Not only are lenders continuing to demand hefty deposits but, even finding your way through the myriad of schemes aimed at helping you, is a complex process. As the Government steps in to help first timers, developers too are offering an unprecedented number of initiatives in the hope of enticing you to buy their products. But how do you decide which schemes are worthwhile and how do you know if you are eligible?

The director of home ownership at Notting Hill Housing Group, Mark Vaughan, admits that finding your way through the first-time buying maze isn't easy: "In response to the economic crisis, government-backed schemes have proliferated. It used to be simple: we called it shared ownership, but now there are a whole host of initiatives dedicated to helping people get on the ladder and it's not easy to find out which you're eligible for or which best suits you." Vaughan adds that the re-branding of some schemes hasn't helped, but says that, despite the confusion, the good news is that more help is now available: "Each scheme has its own merits and, thanks to the work done by housing associations to publicise these schemes, it's far easier to find out about them than it was three years ago."

Government initiatives

A good starting point is to look at the Government's own website www.direct.gov.uk where, in the home and community section, you can read about the many low-cost home ownership schemes available. The site tells you the type of property you might be able to buy and details eligibility criteria. You might be surprised to discover that you don't have to opt for new build but, instead, you can choose a property on the open market going through a traditional estate agent. You then have different funding options, depending on whether you have a deposit but, if eligible, you could get a low-cost equity loan for between 15 per cent and 50 per cent of the property price, and get a traditional mortgage for the remaining share under MyChoice Homebuy.

Alternatively, if you want to buy a new home, you can Rent to Homebuy getting a discounted rent for up to three years with no obligation to buy at the end. Or, opt for what used to be called Shared Ownership, today called New Build HomeBuy which is ideal for those with little savings as you can choose to buy a 25 per cent share, pay rent on the rest, and buy later shares as you can afford them, known as "stair-casing". New initiatives are constantly increasing. Last year, the Government pledged £300m, later increased to £400m, and 130 developers agreed to share the cost of equity loans to help households with incomes of under £60,000 to buy. In April, they announced new measures to encourage first-time buyers and key workers and allocated £3m worth of grants to help with legal fees and furnishings for buyers taking part in their Open Market HomeBuy scheme.

Eligibility

Many first-time buyers might be surprised to find that they can apply for most government-backed schemes: applicants can earn anything up to £60,000, and there is also a special First Time Buyer's Initiative where you can buy a minimum 50 per cent share of the property with regeneration agency English Partnerships funding the rest. You don't pay rent at the start but, after four years, you pay 1 per cent of the share you don't own, increasing to 3 per cent after five years. Sue Dance Head of Sales at Thames Valley Housing finds that many first-time buyers assume wrongly that they aren't eligible. "The actual criteria are very loose, you only need to be earning under £60,000, yet I think many people still assume that you have to be a key worker such as a teacher or fire-fighter." Dance also advises logging onto the Government website and finding your local HomeBuy agent, the housing association who operates these schemes within your local area, and approaching them for information.

Low-cost home ownership

Another surprising revelation for many first-timers is that, by taking advantage of a low-cost home ownership scheme, they may be able to afford a more spacious home: "Housing associations have standards for size of rooms and things like cupboard space which private developers don't have to adhere to. You could therefore end up with something bigger than if you'd bought through traditional methods," adds Dance. Today many developments are of course sold partly through the developer and partly through housing associations and it is impossible to differentiate who bought where. Known as "hidden tenure" the lines between social and private housing are blurring – for the good, says Dance: "Even people who are part renting, part buying have a stake in their properties; they may go on to own them outright and will therefore look after them just as well as those who, from the start, owned outright."

Opting for a home ownership scheme doesn't restrict your choice of property but it does affect your choice of mortgage. Currently just two lenders loan on these types of product and interest levels are not competitive. Despite base rates of 0.5 per cent, first-time buyers will find loans only through the Woolwich and Leeds building societies, with typical interest rates of 6.79 per cent. Dave Evans, head of sales and marketing at Family Mosaic housing association, wants to see Government action on lenders: "I'd like to see more support on the mortgage side. Given the fact that the taxpayer has bailed out some of the banks, I think the Government should hold more sway with these banks in particular."

Simon Devitt, ADominion's Group Director of Home Ownership and Strategy, says that buying through a scheme can greatly reduce your deposit and doesn't affect your location: "We have a scheme right in the heart of central London called Wilton Plaza where one- bedroom flats are valued at around £350,000. To purchase on the open market, a buyer would need a deposit of £87,500. However, through our part-buy, part-rent scheme, we give people the chance to buy a 25 per cent share for around £87,500. A 25 per cent deposit for this would be around £21,875."

Developers' initiatives

As well as government-backed schemes, developers too are coming up with ways to help first-time buyers. These range from the more frivolous free gym membership or supermarket vouchers through to worthwhile schemes, which, for example, allow you to buy 75 per cent of the property now with up to 10 years to pay for the remaining share, with no rent or interest to pay in the meantime. Sarah Garrett, editor of First Time Buyer magazine, says that some of these schemes are as useful as government -backed schemes, but warns first-timers to research the product thoroughly first and to read the small print: "You need to think about the property, location and whether it is cost-effective for you, rather than buying purely because of short-term extras."

Most large developers now offer a range of low-cost schemes. Barratt Homes currently offer Dream Start, a way of buying with no deposit. Buyers pay a mortgage on 75 per cent of the property with no interest or rent on the remaining 25 per cent for up to 10 years. Head Start allows first-time buyers to purchase a new home for just 85 per cent of the purchase price. The remaining 15 per cent is deferred, without interest or rent, for up to 10 years, or until the house is resold. Linden Homes, Muse Developments, Bovis Homes, Redrow and Crest Nicholson also offer similar schemes. Bellway and Dandara are running "try before you buy" schemes, where your year's rent becomes your deposit if you decide to buy.

SmartNewHomes.com lists details of low-cost home initiatives on new developments around the country. Their research shows that private and government-shared equity schemes attract the most buyers with over 60 per cent of developers viewing this as the most effective incentive. MD David Bexon says: "Prices have come down enough to bring out the buyers in force, and incentives have been a catalyst for pushing through purchases."

Notting Hill Housing: 020-8357 4444 www.nottinghillhousing.org.uk; Family Mosaic: 0845 600 4436 www.familymosaicsales.co.uk; ADominion: 0800 432 0077 www.a2dominion.co.uk; Barratt Homes: 01787 377539 www.barratthomes.co.uk; www.smartnewhomes.com

'I couldn't believe I could afford it'

Flight attendant Charlotte Oliver, 20, has just bought a 30 per cent share of a two-bedroom, top-floor apartment at Celsus Grove, Swindon through Thames Valley Housing's part-buy, part-rent New Build HomeBuy scheme.

Charlotte was living at home with her parents in Wootten Bassett near Swindon but, after training as a flight attendant, she found coping with shifts and sharing a house incompatible. "My things were spilling all over the place and I was always aware that little things like dropping my hairbrush early in the morning would wake my mum up, I felt it was time to move out," says Charlotte who had assumed that she wasn't eligible for any government help.

However, after hearing from a friend who had bought through a low-cost home ownership scheme, she approached her local estate agent. They told her about the part-buy, part-rent scheme at Celsus Grove and put her in touch with Thames Valley Housing. "I'd seen it as it's near my parents' home but I couldn't believe it when I realised I could actually afford it and could get on the property ladder without having to find a lot of money for a deposit."

Charlotte had been saving for a few years but was convinced that home ownership was a long way off. She had previously viewed much smaller properties and was surprised by the size of the apartment.

"I couldn't believe how spacious it was. I'd been to see a few others but this one even had a separation between the kitchen and the living room, as well as under-floor heating, which I love."

Charlotte needed a deposit of only 10 per cent of the 30 per cent share she is buying, £3,400, and just needed to raise a mortgage for the rest: around £34,000. "They were very flexible when I said I didn't have enough for the deposit but, in the end, my Nan gave me some early birthday money which really helped." Charlotte pays rent on the share that she doesn't own and has found furnishing her new home to be not too expensive as it came with a fully fitted kitchen and carpets.

Charlotte loves life in her new home and hopes to buy 10 per cent shares each year until she owns outright. She highly recommends low-cost home initiatives to anyone hankering after a home of their own: "Whatever age you are you should look into it. I wanted to live on my own but I didn't think it was possible, now I can't believe that I can really afford to do it."

Prices at Celsus Grove start from £36,000 for a 30 per cent share in a two-bedroom property. Monthly costs work out at around £513 including estimated mortgage repayments, rent and service charges.

For more information contact Thames Valley Housing : 0845 35 12345; www.homebuy4u.co.uk