New deals to help struggling first-time buyers
The Government launched a scheme this week to help first-time buyers, and a Yorkshire businessman is offering his own solution. Sharon Dale reports.
IF there are any doubts that first-time buyers are struggling to get on the property ladder, Kevin Hollinrake of Hunters Property Group has firm evidence that they are still an endangered species.
In 2007 they accounted for 25 per cent of Hunters’ buyers but for the past few years they have represented 12 per cent.
Help appeared to be at hand this week when the Government announced its FirstBuy shared equity scheme with a big fanfare. It’s similar to the previous government’s HomeBuy though not quite as generous.
Those applying for FirstBuy on a new-build home will need an income of less than £60,000 and a five per cent deposit.
The Government and the developer will then fund an “equity loan” for 20 per cent of the purchase price, leaving the buyer with a mortgage for 75 per cent of the property.
The equity loan is interest-free for the first five years with interest charged at 1.75 per cent in the sixth year and RPI inflation plus one per cent after that. The 20 per cent share is repayable at market value when the property is sold.
So far, more than 100 housebuilders have been selected to take part, including Barratt and Miller Homes. Lenders backing the scheme include Halifax, Nationwide, Barclays and the Melton Mowbray Building Society.
Housing Minister Grant Shapps says: “With 80 per cent of young first-time buyers depending on parental help, I am determined that we pull out all the stops to help those who want to take their first steps onto the property ladder. FirstBuy will do just that – a Government-backed scheme making £500m available to offer a valuable alternative to the Bank of Mum and Dad.”
Those who have battled their way through previous Government-shared equity schemes reveal that the process can be slow and bureaucratic. This offer is also likely to be oversubscribed. So those who want to take advantage of it should act quickly.
It aims to help about 10,000 homebuyers over the next two years and while this is positive, it remains a drop in the ocean, according to Kevin Hollinrake, who would like to see a similar scheme for second-hand homes.
“What we really need is for banks to start lending because that is the main issues,” he adds.
Most would-be first-time buyers are busy saving for a deposit or borrowing from the bank of Mum and Dad.
While there are 95 per cent mortgages available, these are for the most credit worthy, attract a higher interest rate and are few and far between. Most lenders demand at least a 10 per cent deposit, which for an average terraced home in Yorkshire is between £7,000 and £10,000.
Yorkshire businessman John Laurie believes he has come up with a way of tackling the deposit problem.
His company First Time Buyer Solutions is offering to pay some or all of the deposits on the second-hand properties it sources.
“There are lots of schemes for new builds, but nothing for traditional first-time buyer properties such as terraced houses, which is why I came up with this idea,” he says.
John, a property investor and former mortgage adviser, sources cut-price homes from auctions and from investors keen to offload some of their portfolio. He sells them on with a mark up to first-time buyers.
“We buy well from places that first-time buyers can’t access and this allows us to offer a gifted deposit.
“Our customers are people who are eligible for a mortgage but who haven’t got a deposit. In a lot of cases it would take them years to save one, especially if they have rent and bills to pay,” he says.
His properties include a twobedroom cottage in Longwood, Huddersfield, for £72,000 with the deposit and legal fees paid.
Whatever deal you decide on, it pays to make sure the property you are buying is for sale at a fair price. Check it against comparable property for sale in the area and don’t just rely on a mortgage valuer’s report.
“If you pay £5,000 or £10,000 too much you’ll feel it when you sell it. I’d also say check with a lettings agent that what you are buying is a good rental prospect in case your circumstances change,” says Kevin, who foresees a positive future for prices.
“I think there is huge pent-up demand. I don’t subscribe to the view that we will become a nation of renters. I can remember that being predicted in 1992 and it never happened.
“People have gone away to save deposits and when they have got them and when confidence improves and the banks start lending more, which I believe will be in another couple of years, demand will be high and prices will rise. It could even get to the point where there is another property bubble.”
PRICE IS RIGHT: This home at College Mews, Whitwood, near Castleford is £99,995, the FirstBuy price with Barratt is £79,996 and the deposit needed is £3,999.