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HomeBuy truths

Last week saw the launch of the Government’s new open market HomeBuy scheme. The fact that little in-depth press comment was seen in the nationals is possibly a reflection of scepticism in the market about the scheme.

Many I have spoken to about it do not think the scheme is anything more than a political move to get the lending market to take some of the exposure that the Government already had under the existing HomeBuy scheme. I am a little less pessimistic as I welcome any initiative to open up the bottom end of the market.

After all, it is all but certain that if we fail to sustain the first-time buyer market, it will ultimately be reflected in lack of demand further up the housing chain, which would be bad news for all of us.

The scheme itself is too complex for the majority of potential buyers to understand without advice and, therefore, the real issue lies not with the products but rather with distribution. The process that a potential buyer goes through is a pre-validation with the local HomeBuy agent.

However, without the benefit of sustained marketing, it is unlikely that a prospective purchaser will be aware of their existence and most of the estate agents I have spoken to are blithely unaware of how to kick off the process.

What the scheme needs to test its real market viability is a sustained Government marketing program hitting workplace marketing in the relevant sectors, estate agents in the geographic areas where the scheme has maximum relevance and the open market as a whole .

Although Advantage came in at the last minute as a fourth lender in the sector, its own offering in the true open market is more relevant for most buyers as it carries far fewer restrictions. I have often opined that shared equity could be the next sub-prime in that it provides lenders the opportunity to earn enhanced margins while fulfilling a market need. For this to bear fruit, we need more lenders actively competing with Advantage and providing more choice.

At this point, intermediaries can become more powerful grass-root advocates of the schemes, particularly those oper- ating in the estate agency sector. However, just like sub-prime, they offer a heightened risk of misselling which will have to be watched carefully.

Mark Chilton is chief executive of Purely Mortgages


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