As well as the new schemes introduced by Chancellor George Osborne in the latest budget announcement, there are several others that could benefit first-time buyers.
Mr Osborne’s three-year ‘help to buy’ scheme will, from April 2013, take over from the similar FirstBuy and NewBuy schemes.
Help to buy will provide an equity loan worth up to 20 per cent of the value of a new-build home for first-time buyers as well as existing homeowners. The government has left it to lenders to set their own rates on the mortgages they offer. The loan is repayable once the home is sold.
In addition to the £3.5bn deposit loan part of the Help to Buy scheme, the government will also introduce a mortgage guarantee system from January 2014, provided for lenders which offer mortgages to people with a deposit of between 5 per cent and 20 per cent on homes with a value of up to £600,000.
Brian Murphy, head of lending at Mortgage Advice Bureau, notes that this requires less capital is upfront without substantially higher risks to lenders thanks to government committing an element of cash to act as guarantor.
He adds: “There are a number of other schemes to help FTBs. For those with an income below £60,000, first buy equity loans and shared equity or ownership schemes are available.
There are also local council schemes, he suggests, such as Gravesend’s ‘£2million’ scheme, which provides an indemnity of up to 20 per cent when a FTB puts forward a 5 per cent deposit.
Some lenders also provide offset mortgages. An offset mortgage can be a good money-saving option for homebuyers with savings, linking together the mortgage loan and the offset savings balances so the borrower only pays interest on the difference between the two, which can reduce the mortgage term or monthly repayments.
Offset products which have the option of ‘offset plus’, link the borrower’s mortgage loan to the savings of family or friends, from providers such as Woolwich, Lloyds and Yorkshire BS.
“This gives the borrower’s parents or grandparents, for example, a way to offer a helping hand but retain full control over their savings, which they can access at any time, without notice or penalty,” according to a spokesperson from Yorkshire Building Society.
