Rent now, buy later scheme unveiled

16 July 2008

First-time buyers could be given a helping hand onto the ladder under a new homeownership scheme that allows them to rent first, buy later.

Under the scheme, households earning less than £60,000 a year will to able to rent a new home at a discounted rate of 80% for up to three years. They will then be given the option to buy a part share in the home.

The government says the scheme - called Rent to Home Buy - will enable the household to save for a deposit to buy the share in the home.

Housing minister Caroline Flint unveiled the scheme: "The package will both help people facing difficulties right now, and lay the foundations to help meet the long-term housing needs of the country."

But the view from housing experts is mixed.

Nicholas Leeming, director of, says the plight of first-time buyers is the plight of the housing market as a whole.

“The housing market has stalled largely because first-time buyers cannot get onto the housing ladder due to lack of mortgage availability. It needs to be given a kick-start and the scheme needs to be available for properties that are already occupied, not just surplus new builds, so that those trapped by a lack of buyers further up the ladder are able to move again,” Leeming adds.

However, the Intermediary Mortgage Lenders Association, a trade body, says the scheme is not a long-term solution.

Executive director Peter Williams says the government should focus on providing liquidity to lenders in order to bring down the cost of mortgages: “Offering first-time buyers ‘rent before you buy' is a sticking plaster, not a long-term cure.”

Prior to the scheme being unveiled, the Council of Mortgage Lenders (CML) offered a potential solution to the deadlock in the mortgage market, which it hopes the government will adopt in order to support lenders and their borrowers.

It proposes the Bank of England kick-starting the securitisation market. This is a virtual marketplace where mortgage lenders have, in previous years, traded debt with one another in order to raise funding for new lending.

Currently, the market remains closed because of a lack of confidence and also less liquidity among financial firms. But the CML says that if the central bank was to effectivley underwrite securitisations through unsecured loans.

Michael Coogan, director general of the CML, says: "There is a window of opportunity here for the government and the Bank of England to break the logjam in the housing and mortgage markets and underpin confidence in the financial system.

"The single biggest issue in the housing market that the authorities need to address is the lack of available funding to support new mortgage lending.”

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