Mortgages. Government backed mortgages for first-time buyers look even weaker.
Just before Christmas we commented on the Governments new “Open Market Homebuy” mortgage scheme which is planned to be operational in October 2006.
Under the scheme, first time buyers will be able to take out a mortgage for 75% of a home’s value and the government and the mortgage lender will each effectively buy 12.5% of the property. Then when borrowers eventually decide to sell the property, the owner will receive 75% of the net proceeds and 25% of the sale price will go to the Government and the mortgage lender, as they effectively own the balance.
In our view, first time buyers should not become excited about this scheme for four reasons: -
• The Government has now confirmed that buyers will have to suffer a 1% premium on the mortgage rate
• Despite hopes that more mortgage lenders would join the Halifax, the Yorkshire Building Society and the Nationwide, as co-sponsors of the scheme, no more lenders have joined in.
• The Government expects the scheme to lend to 4,000 first time buyers per year. That’s just over 1% of all first time mortgage deals arranged each year. In terms of availability, it seems as if Open Market Homebuy mortgages are going to challenge hens teeth!
• The Government hasn’t even announced the rules under which a first time buyer can qualify to apply for an Open Market Homebuy mortgage.
So even if you’re happy to pay the 1% premium, your chances don’t look too good for making the qualifying grade to become one of the first time buyers accepted onto the scheme.
Our advice is find a top class mortgage broker and seek out a great deal on the open market.
