A new shared equity mortgage to help an extra 20,000 people buy their own home is being launched by Housing Minister Yvette Cooper. The Government has teamed up with four private sector lenders, Nationwide, Yorkshire Building Society, Advantage 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 could typically obtain a mortgage of just £122,500. But if eligible for Open Market HomeBuy, they could potentially buy a home worth over £160,000. 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.
Yvette Cooper said: "We want to help more families get a first step on to the housing ladder. If you haven't got family or friends who can help it can be hard to get started. In the long run we need to build more homes to ease the pressure on house prices. But in the meantime this new mortgage deal will help thousands of families into a home of their own."
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% 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.
The scheme is available to key public sector workers, social tenants or those on a council waiting list and other priority first time buyers. 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% 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% 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.
In addition to the new HomeBuy mortgage launched today, qualifying households have the option to buy a shared ownership home through New Build HomeBuy, or buy their social rented home through Social HomeBuy. The Government is investing £970 million in the Housing Corporation's Affordable Housing programme for 35,000 low cost home ownership properties. English Partnerships is also offering equity loans on homes on public sector land. In addition, the Shared Equity Task Force will report by the end of the year on ways to further increase the number of households able to benefit from shared equity schemes.
