First-time buyers’ fund runs out of cash after 8 days
THOUSANDS of young families face disappointment after a Scottish Government scheme to help first-time buyers ran out of cash in just eight days.
The flagship First Home Fund, which lends people up to £25,000 towards the cost of their first home, was launched on April 1 but is already ‘fully committed’ for 2021-22.
It is understood the initiative was closed on Thursday afternoon after being inundated with applications.
The budget for the fund was slashed from £200million last year to £60million this year.
Scottish ministers blamed the decision on a 66.5 per cent reduction in a form of Treasury funding allocation, known as financial transactions.
Link, the housing association which runs the First Home Fund scheme for the Government, said: ‘Any applications in progress but not yet submitted at point of closure are unable to be processed.’
The news will represent a huge blow to young families who are struggling to find suitable accommodation and get on to the property ladder. The escalating housing crisis was repeatedly highlighted in focus group and opinion poll research carried out for the polling organisation Survation.
Greig Brown, the mortgage operations director at Aberdein Considine, one of Scotland’s largest property and mortgage companies, said that concerns had been raised about the reduced funding for the scheme.
He said: ‘This has been a hugely popular scheme and has helped thousands of first-time buyers plug the gap in their deposit.
‘There will be many hundreds, if not thousands, of buyers left disappointed by this news.
‘Many lenders are still looking for 90 per cent deposits from first-time buyers, or greater in some cases.
‘The UK Government’s mortgage guarantee scheme, which was supposed to increase supply of 95 per cent mortgages, has yet to have any meaningful impact.
‘Many in the industry voiced concerns when the Finance Secretary [Kate Forbes] announced that the First Home Fund had been scaled back and I hope that consideration is given to extending it.’
A Scottish Government spokesman said: ‘The First Home Fund has now closed to new applications as the allocated 2021-22 budget for the fund has been fully committed.
‘As previously said, the total Scottish Government financial transactions budget in 2021-22 was cut by almost two-thirds as a result of the UK Government’s spending review in November.
‘As such, difficult choices have had to be made, including reduced funding for the First Home Fund in 2021-22 and the closure of the main Help to Buy scheme.’
The £25,000 loan was open to any Scot living north of the Border – as long as they had never previously owned a property. In return for the financial assistance being offered, the Scottish Government takes an equity stake in the house, which could either be a new-build or an existing property.
For example, if a person paying £100,000 for a home found £75,000 for a deposit and mortgage, then the Government would finance the other £25,000.
But if the property is later sold at a profit, the Government takes a share of any increase in its value to reflect its 25 per cent stake in the home.
Using the example of the property bought for £100,000 being sold for £150,000, then the Government would take £37,500 back.
The scheme was previously described as a ‘lifeline’ to first-time buyers who otherwise struggled to get on the property ladder.
Their plight was made even more challenging after a tightening of lending by mortgage providers last March in the wake of the coronavirus pandemic.
This meant that the required deposit increased from around 5 per cent to 15 per cent, subsequently pricing many young people out of the market.
‘Difficult choices had to be made’