Good times are here for first-time home buyers, thanks to the government. Now they may happily consider shared equity homes where they have to pay for just a proportion of the house.
First-time buyers get easily discouraged by the high prices of houses and often choose down-market areas, a decision which they later regret. Many are forced to buy houses on the open market. All this is expected to change as the government announced plans to underwrite private mortgages in order to revitalize the property market, keep prices under control and ensure homes for all.
Chancellor of Treasury Gordon Brown and Labor MP John Prescott yesterday announced an initiative, where about 15,000 shared equity homes built on land owned by national regeneration agency English Partnerships. This initiative is expected to nudge developers into building more low-budget homes. If things go as planned then you might be able to get a 900 sq. ft., two-bedroom house for around £60,000.
A spokesman for the Council of Mortgage Lenders (CML) said “It may be a reaction to the passing of the boom in the housing market. The middle class are going to welcome this move, but whether it will keep the property market healthy is to be seen.”
Lenders had seen mortgages drop to coincide with the slide in property prices, during the last two months.
Under the government proposed scheme of shared equity homes, the buyer would be able to pay only 75 percent, and the remainder share is split between the government and the mortgage provider. Both would each take a £12,500 stake. If the price drops or the owner stops paying the mortgage, then the government's £12,500 interest would cover the lender's equity position.
This effort would help reduce the purchase price without distorting the market.
Many first-time buyers, mostly young people in their early 30s, are opening up to the idea of shared ownership homes, where they can now buy a share of a property from a social landlord or housing association. The buyer will have to arrange a mortgage for his or her share. For the remaining portion, s/he will have to pay a subsidised rent. The new home owner can then slowly buy more shares as and when he can afford.
The proposed scheme is still being considered by the policy makers and April 2006 is the tentative date for the launch.
Posted
on : Sat, 02 Apr 2005 00:00 GMT | Mortgages News
By : Mike Lawson
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