Prime Minister Gordon Brown underlined his intention to put housing at the top of the agenda with the publication of a green paper last week.
The Government is pledging to plough an extra £3bn into affordable housing, including a commitment to build at least 70,000 affordable homes a year by 2010-11. These will include 45,000 new social housing properties a year, which the Government claims is more than double the amount compared with 2004.
The green paper also saw the Government announce that it will expand its Open Market Homebuy scheme to include a new 17.5 per cent equity loan product.
The current Homebuy scheme has faced stiff criticism since launch last October, with many commentators saying the offering is too limited.
Savills Private Finance managing director Mark Harris says the Government’s housing schemes are half-baked and should be open to more people.
He says: “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.”
Despite the Government claiming in October that the Homebuy scheme would help 20,000 more families buy a property by 2010, Money Marketing revealed in April that fewer than 500 people had taken out a mortgage in the first six months of the scheme.
In the green paper, the Government says it recognises that current products are not sufficiently flexible for first-time buyers. The present deal offers buyers an equity loan of up to 25 per cent of the property price with one of four participating lenders – Nationwide, Advantage, Yorkshire Building Society and Halifax.
The proposed 17.5 per cent product can be used in conjunction with a mortgage from any lender in a bid to increase competition in the market. But a Department for Communities and Local Government spokesman admits it will still be available only for key public-sector workers and social tenants.
John Charcol senior technical director Ray Boulger questions why the Government is only helping particular sections of the workforce when every job plays an essential role in the economy.
He says: “Affordable homes for the Government is really synonymous with subsidised homes but it is not doing this on commercial terms. I think it would be much better if the private sector helped out although, of course,it would not be on as generous terms but at least this would be available to all FTBs.”
Boulger says a number of lenders, including Yorkshire Building Society, plan to launch their own schemes in the near future.
But Homeowners Mortgages chief executive Mark Chilton believes that Government participation in shared equity schemes is very valuable. “The problem it needs to overcome is the lack of awareness and the difficultness in accessing a Homebuy scheme,” he says.
Chilton says the reason the current scheme has not been a huge success because borrowers have to go to an official Homebuy letting agent rather than a mortgage broker.
He says: “Until they offer it through every mortgage broker, they will not get enough take-up. It is the same thing as always with the Government – the execution lets it down.”
However, Chilton believes that shared equity schemes will grow in strength in the near future. He says: “If you get the formula right, the Government could build a whole massive sustainable marketplace. I think in 10 years time the shared equity market is going to be bigger than the adverse market.”
Harris says: “The big criticism of the existing scheme is that it is limited to a small number of players and products. Borrowers are locked in for five years and there is only one fixed product. So any broadening out is good news but it would be good to know exactly how much money it will be giving to the scheme.”
A DCLG spokesman says financing for the new product will come from the existing low-cost home ownership budget of £500m for the Homebuy scheme. He claims the Government now expects to help 25,000 households a year – a 5,000 increase on its current target.
Advantage chief surveyor David Dalby admits that the current scheme is not setting the world alight. He says: “This is probably because of a lack of knowledge of the product and the market by borrowers and the mortgage industry.”
The Mortgage Practitioner sole practitioner Danny Lovey says the drawback with shared equity is that not many lenders understand it properly. He says: “There is probably a mainstream body of 10 lenders that do it and they will still want between a 5 to10 per cent deposit up-front.”
The Government looks set to introduce further shared equity schemes in the future and has appointed a consultant, Brian Pomeroy, to advise it on following up the Shared Equity Task Force and developing shared equity with the private sector.
It is also considering proposals to allow borrowers to buy as little as 50 per cent of a home chosen on the open market. Whether that will increase uptake remains to be seen.