Expanded shared equity scheme to help first time buyers

25-Jul-2007

First time buyers are to receive larger equity loans from the government under plans outlined in this week's Green Paper.

A 17.5 per cent loan will replace the 12.5 per cent loan currently offered by the government, housing minister Yvette Cooper announced, as well as more competition being encouraged among mortgage lenders.

Currently just four lenders participate in the Open Market HomeBuy scheme, offering a 12.5 per cent loan of their own alongside the government's, but now the scheme is to be opened up to all lenders in an attempt to provide first time buyers with more competitive rates.

Industry figures have reacted cautiously to the changes, saying that affordability problems would still remain.

"One of the features we commented on with the Open Market HomeBuy scheme was that it was hard to differentiate between the 4 lenders' offerings," advised Helen Adams, managing director of FirstRungNow.com.

"This solution still requires the first time buyer to take out a hefty loan in most of London and the south-east where problems are worst. Demand will probably still outstrip supply for these loans," Ms Adams added.

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