Headlines: October 3rd, 2006

HELP WITH THE HOUSING LADDER

 

Key public sector workers are among those who will qualify for a new shared equity mortgage to help buy their own home. The Government has teamed up with four private sector lenders, Nationwide, Yorkshire Building Society, Advantage – a Morgan Stanley company, and Bank of Scotland, to offer a mortgage that will boost people’s buying power by up to 25 per cent. Currently, a family on a combined income of 35,000 pounds could typically obtain a mortgage of just 122,500 pounds. But if eligible for the Open Market HomeBuy scheme, they could potentially buy a home worth over 160,000 pounds.

Although mortgage rates are still low, rising house prices have put pressure on first time buyers. Almost half of home buyers in their twenties now rely on help from family or friends to get started. Open Market HomeBuy will allow house hunters to apply for a regular mortgage topped up with equity loans, funded by Government and one of the four lenders.

No deposit is required and monthly repayments will start at around 20 per cent less than buying without assistance, because lenders and Government would expect to benefit from any increase in the value of their equity share in the property.

Applicants will need to contact a HomeBuy agent – a one stop shop providing affordable housing options across the UK. In order to qualify, an applicant would need to be able to fund 75 per cent of their purchase with a mortgage offered by one of the four lenders. This will be topped up with two equity loans each worth 12.5 per cent of the purchase price from the Government and the lender.

The scheme allows the buyer to choose any property on the open market within their price range. There are no charges on the lender’s equity loan for the first 5 years, and no charge will ever be placed on the Government’s equity loan. In return both the lender and the Government will be entitled to a share of any increase in the value of the property when the home is sold and the equity loan repaid.