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Government in a spin over HomeBuy scheme

This week has seen the Government make even more promises over affordable housing with the publication of its green paper on housing. It announced the expansion of its Open Market HomeBuy scheme with the launch of a new 17.5 per cent equity loan product after admitting its existing scheme was not flexible enough for first-time buyers.

But after a few calls by Money Marketing to the Department for Communities and Local Government press office it became clear that the new product is unlikely to set the shared equity world alight.

A DCLG spokesman admitted the Government would not be putting any additional money towards the scheme, stating that funds for the new product would come from the existing £500m Low Cost Home Ownership budget.

To add even further bad news, despite saying its new equity loan product will help 25,000 people become homeowners each year – an increase of 5,000 from its previous target of the existing HomeBuy scheme, the spokesman says the product still remains only open to the same categories of people as the original scheme. This consists of public sector key workers, social tenants plus other priority first-time buyers.

The existing scheme has faced stiff criticism from those in the mortgage industry since its inception last October particularly over the limited nature of the scheme. Savills Private Finance managing director Mark Harris previously told MM that the Government’s housing schemes are half-baked and should be open to far more people.

Harris said: “I think that affordability has become an issue and the products and schemes the Government is backing need to be refined. It has got to stop saying how many hundreds of millions of pounds it is going to commit. It needs to get on with it and listen to people in the market who know what is needed.”

In addition, GMAC-RFC executive chairman Stephen Knight has previously claimed that the HomeBuy scheme could be opened up to a potential 400,000 first-time buyers if the Government were to be more flexible. “If the project could be freed up from the current rules as to who qualifies, and what lenders can offer, we could achieve real market impact with shared equity.”

But whilst the new product will widen the scheme slightly by allowing purchasers to use the Government’s 17.5 per cent equity loan in conjunction with a mortgage from any lender – rather than as before with just the four lenders on the existing scheme – it clearly does not open it wide enough.

As John Charcol senior technical manager Ray Boulger points out, if the Government does not put additional money into the funding pot then it will actually reduce the amount of people they can help on their existing 25/75 shared equity scheme.

With Gordon Brown’s claim that housing and first-time buyers will be at the heart of his Government, he will need cast aside his penchant for announcing dramatic headline figures with little substance behind the numbers and actually get to the root of the problem.

If the Government persists in limiting its shared-equity schemes to what it considers key public sector workers, it could face a revolt from the increasing number of first-time buyers disgruntled over not getting any help from the Government on getting onto the property ladder.

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