More help for first-time buyers
First-time buyers struggling to raise a deposit have received a boost with the announcement of a new scheme to help them get on to the property ladder.
The Government has earmarked £250 million from the Bank Levy to help around 10,000 households with incomes of up to £60,000 buy a new-build property.
Under the FirstBuy initiative, buyers must save a deposit worth 5% of their property's value, with the Government and housebuilders putting up 10% each through an equity loan, enabling people to qualify for 75% loan-to-value mortgage. The equity loan will be interest-free for the first five years, with interest charged at 1.75% in year six, and at inflation plus 1% thereafter.
The Government hopes the scheme will also provide a boost to the construction industry and support up to 50,000 jobs, after the number of new homes that were built fell to their lowest peacetime level since 1923 last year.
The initiative is almost identical to the Homebuyer Direct scheme that was launched by the previous government in 2009, under which the government and housebuilders provided equity loans totalling 30% of a property's value.
Around £275 million of funding was made available for Homebuyer Direct and it has helped 9,000 people to buy their first home.
The Council of Mortgage Lenders welcomed the announcement, saying it would provide "modest help" for first-time buyers. A spokeswoman said: "Every little helps, but it is not going to fundamentally change the landscape."
First-time buyers have been struggling to get on to the property ladder since the credit crunch struck and lenders began to demand large deposits in order for people to qualify for the best rates.
Just 194,600 people bought their first home with a mortgage in 2010, well down on the more than 500,000 people who got on to the property ladder each year during the late 1990s and early part of the last decade.
First-time buyers are currently putting down deposits that average around 20% of their property's value, while the average age at which people who do not receive parental help to buy their first home has risen to 31.