Government offers a £300 million helping hand to first-time buyers

house and keys

The government has pledged £300 million to help first-time buyers onto the housing ladder through shared ownership schemes.

In a report outlining the government’s draft legislation for 2008/09, Gordon Brown announced plans to use a £200 million fund to buy new build properties which can then be leased to social tenants or sold to first-time buyers through shared ownership schemes.

Brown also revealed a further £100 million investment in extending current shared ownership schemes, known as the HomeBuy schemes, to include all first-time buyers with a household income of less than £60,000. Previously, only key workers were able to apply for the scheme, which enable people to buy a share from 25% in a property or take out a shared ownership mortgage.

Caroline Flint, the government’s housing minister, says: "Most families aspire to get onto the housing ladder, but are being priced out of the market.

“We want to give them the support to help them buy an affordable home. The long-term solution to the challenge of affordability is to build more homes. But in the meantime, we are doing more by giving more first-time buyers the chance to boost their purchasing power and put their dream home within reach."

HomeBuy works by allowing people to buy a share of at least 25% in a property, with a housing association and government purchasing the remaining share of the property. The buyer then pays their mortgage as well as rent on the percentage of the property they do not own. They do, however, have the option to increase the amount of equity they have in the property down the line.

The Council of Mortgage Lenders (CML) welcomed the news that all first-time buyers rather than just key workers can now apply for HomeBuy schemes.

Michael Coogan, director general of the CML, says: “[The scheme] will remove an anomaly by which providing help for one group of less well-paid workers makes access to home-ownership more difficult for others earning similar salaries but working in different jobs.”

Mortgage brokerage John Charcol also says the move will help more people onto the housing ladder for the first time. But spokeswoman Katie Tucker warns: “The administration with the HomeBuy schemes has been notoriously slow and complicated, many applicants find that a mortgage plus rent option is more expensive than renting or buying, and of concern with the new build HomeBuy is the risk of new builds losing value."