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HomeBuy not on the range

The HomeBuy Scheme is in turmoil, with confusion over how it will be implemented, who will be involved and whether those lenders willing to take the plunge will be ready for trials of the scheme in April 2006.

Abbey has dealt a blow to the HomeBuy plan, saying it would no longer be taking part in talks due to the limited size of the trial and the investment in systems development needed.

Abbey media relations executive Joe Wiggins says: “Potentially, the scheme is a positive step as it is clear that first-time buyers need all the help they can get.”

But he says Abbey felt “involvement would not have been cost-effective at this time”. The company is awaiting the outcome of the trial.

Wiggins says: “We believe the scheme does have its limits but we also recognise that FTBs are the lifeblood of the housing market, so much more needs to be done with regard to housing supply.”

Alliance & Leicester also says it will not be meeting with the ODPM/Council of Mortgage Lenders working party but maintains it never was really involved.

Press manager Sally Lauder says: “While we have no plans to attend any further meetings at this stage, our view is that this is a worth-while project has not changed and we will be keeping a close eye on developments to see how we can support it in the future.

“If we were invited to another meeting and thought we could add value, we would definitely go and the same applies for any similar initiatives designed to help FTBs and those who need a helping hand.”

So, at present the sole participants in talks on HomeBuy are Halifax, Yorkshire Building Society and Nationwide.

ODPM spokesman Gavin Maguire maintains that the scheme only wanted about three lenders. He says Abbey and A&L were maintaining a watching brief and to some extent were sitting on the fence from the beginning.

“How convenient”, says John Charcol senior technical manager Ray Boulger, for the ODPM to take this line after the exit of two high-profile potential players.

Council of Mortgage Lenders head of external affairs Sue Anderson says: “The implicit assumption is that there needs to be some spread of participation and diversity to spread the risk.”

Would-be participants such as GMAC-RFC are waiting for the definition of “qualifying lenders”. As it is neither a society or bank, it is unable to get involved – an issue that has yet to be addressed by the ODPM.

HomeBuy is divided into three categories. HomeBuy’s social category will enable social tenants to buy a share in the property they currently live in, with an initial purchase of at least 25 per cent of a home. The remainder of the equity will be held by a housing provider which will be able to levy a charge of up to 3 per cent on their equity.

Open Market HomeBuy will enable people in London, South-east and Eastern regions to buy a property on the open market, with the help of an equity loan. Buyers will be expected to raise finance to purchase about 75 per cent of a home on the open market. A housing provider will provide a loan for the balance required and “a small charge may be made on the equity share held by the provider.”

New Build HomeBuy is a scheme enabling people to buy a share in a newly built property, with a minimum initial purchase of at least 25 per cent. The housing provider will hold the rest of the equity.

The guidelines available still fail to clarify what is expected from the lender and the consumer. John Charcol senior technical manager Ray Boulger says: “The ODPM is reluctant to specify the charges to be levied by providers on the equity share of the prospective homeowner.

“The real problem is that lenders are in the business of lending and not investing in property. This is a classic example of the ODPM bulldozing its ideas through without engaging in meaningful consultation.”

Yorkshire Building Society is a little apprehensive as to how the plan will be pulled off, with only eight months for details to be firmed up and systems to be in place.

Corporate affairs manager David Holmes says: “The biggest difficulty is that the ODPM wants to start in April next year. We also want to start then but there is so much work to be done. We are positive about the scheme but this might be difficult.”

Boulger is concerned how a key facts illustration can be developed to encompass all details of a rather complicated arrangement. He says: “I think it is more likely that lenders will come up with their own solutions as to how to help FTBs. It is in their interest to help them.”

Norwich & Peterborough Building Society has launched an FTB mortgage where the homebuyer and parent become joint applicants to the mortgage and are both responsible for the mortgage debt.

The FTB must be able to support 75 per cent of the required loan and the parent’s income is used to cover the remaining loan amount.

Scottish Widows, A&L and Bristol & West among others are all finding success with their FTB mortgage schemes.

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