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.

Yorkshire Post - Property - - PROPERTY -

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.

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