Brokers have welcomed Government plans to commit £3.5bn to shared equity mortgages over the next three years and called for clarity over whether they will be available through intermediaries.
Chancellor George Osborne announced the Help to Buy shared equity sheme, which is expected to help up to 74,000 homebuyers, in this week’s Budget.
To qualify for a 20 per cent loan from the Government, borrowers must have a 5 per cent deposit for a property worth up to £600,000.
The loan will be interest-free for five years and will be repayable on sale. After this period the borrower will be charged 1.75 per cent, a figure which rises by RPI plus 1 per cent each year.
MAC Consulting chief executive Mark Chilton says: “This will suit young professionals who are likely to have an increasing salary, so they will be more likely to be able to repay the Government when they want to move.”
John Charcol senior technical manager Ray Boulger says: “The scheme is going to start to cost borrowers after five years but most people, particularly younger people, will probably take the view that their income is going to go up over the five year period so that they will be able to repay the loan.”
First Complete sales operation director Toni Smith says the scheme will only succeed if it is made available through intermediaries – something the Treasury has yet to confirm.
Smith says: “Based on the fact that intermediaries accounted for more than 50 per cent of total lending in 2012, to be truly effective this shared scheme needs to be available through the intermediary community.”