Brown's key for first-time buyers

This Is Money13 April 2012

THOUSANDS of first-time buyers will be given financial assistance on to the housing ladder under plans outlined by Chancellor Gordon Brown. In a deal struck between mortgage lenders and the Government, couples would have to raise as little as half the cost of homes sold on the open market.

The rest of the equity in the property would be shared between the Government and the bank or building society, potentially cutting average repayments on a £200,000 home by up to £372 a month.

The scheme will not be restricted to the key public sector workers previously helped by the Government, and there will be no means test. However banks and building societies will have to sift out deserving applicants whose salaries do not stretch to the average-priced house, from those trying to buy dream homes beyond their means.

In an interview for The Observer newspaper Brown said: 'It means that people who couldn't afford the full price of a home can afford the partial price, and they can gradually ramp up their stake. It's putting home ownership within the reach of thousands of people who would not be able to do so.

'This is part of our idea of helping people meet their aspirations for themselves. I have no doubt that more people want to be able to get a foot on the housing ladder earlier, and there are a lot of people who feel this is beyond their grasp.'

The plans appear to reflect Government concerns not only over the frustration of first-time buyers, but over the effect on existing householders. If new buyers cannot enter the market, selling could grind to a halt, potentially undermining the rising property market which has helped keep consumer demand and the economy buoyant.

The move comes amid signs of a gradual slowdown in the housing market, with recent figures showing house sales in London at their lowest levels in a decade.

Brown will unveil details of the expansion of 'shared equity schemes' in the coming week.Under the plans, the buyers would need to raise mortgages ranging from 50% to 75% of the cost of the property. The rest of the equity would be split between the Government, the lender or possibly the house-building company.

Buyers would pay a nominal 'rent' of no more than 3% on the part they do not own, with the option to buy the whole stake if their incomes improve.

With Deputy Prime Minister John Prescott and Housing Minister Yvette Cooper, Brown will also unveil plans to release more land for house building, cut the costs of construction and ease planning rules.

The scheme has caused concern among housing campaigners. Adam Sampson, of the housing charity Shelter, said: 'It is a real problem that they are seeking to tackle. House price inflation - which frankly they have let rocket out of control.

However, we are talking about subsidy being directed away from providing housing for the poorest, in favour of enabling people who very often already have adequate housing, to profit out of home ownership. We question whether it is a legitimate priority to subsidise people to acquire wealth'

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