The Government’s extension of the FirstBuy scheme may have “cut the ground from under” commercial products such as the Castle Trust partnership mortgage, according to the Association of Mortgage Intermediaries.
Chancellor George Osborne today announced the Government will commit £3.5bn towards shared equity loans over the next three years. This is an extension of the £500m shared equity scheme FirstBuy, which launched in 2011.
Both schemes offer borrowers a 20 per cent loan in order to secure a mortgage but while the Castle Trust product requires borrowers to hold a 20 per cent deposit, the Help to Buy scheme only requires them to hold a 5 per cent deposit.
Ami chief executive Robert Sinclair says the Budget features many positives but asks whether this shared equity commitment undermines Castle Trust’s own efforts.
Sinclair says: “This product, which looks like an “imitation” of the Castle Trust product, shows a Government that has been listening to the market, but may have cut the ground from under that commercial product. The £600,000 house value limit is higher than we would have expected, as it may have been limited to the £500k stamp duty limit.”
Castle Trust was singled out by former housing minister Mark Prisk in October as an example of the sector working to help homeowners.
Prisk said: “On top of this Government support I want to see private companies devise new and innovative ways to help those who want to become homeowners to do so, as Castle Trust is working to do.”
But Castle Trust chief executive Sean Oldfield highlights that the Government scheme will only apply to new build properties while the partnership mortgage is available to a much wider market which encompassess all existing properties.
He says: “We very much welcome the Government’s initiative for home buyers today and their continued endorsement of shared equity. The government’s initiative exactly supports our approach to Partnership Mortgages to help people afford to buy their own homes. As well as the government support for those buying a new property, home buyers looking at existing properties can come to Castle Trust today for help. There are around 25 million existing homes and just over 100,000 new homes built per year, so we are excited to be providing homebuyers a huge range of purchase opportunities alongside the government.”