The Chancellor unveiled a new scheme in his Budget speech designed to help first time buyers take their first step onto the property ladder. The scheme, dubbed Firstbuy, offers an equity loan of as much as 20% of the property, in partnership with builders on their newly built properties.
The equity loan does not carry any interest charge in the first 5 years and can be bought out by the first time buyer at a later date allowing them to step up to full ownership. With first time buyers struggling to find the large deposits that lenders require to secure a mortgage, this scheme should certainly appeal.
The scheme is only available on new build properties in a bid to help support the construction industry as well as first time buyers. New build developers have found life very difficult in recent years and the oversupply of city centre flats at the peak of the market has seen values hit hard. As a result lenders remain cautious about new build and will generally insist on even larger deposits.
The funding available is expected to help more than 10,000 first time buyers. We’ve yet to see the full detail of Firstbuy but it sounds like a straightforward facelift for the previous Government’s Homebuy Direct and I’d expect that we will see lenders offering similar mortgage rates as they did on that initiative.
Homebuy Direct and other previous equity loan options have proved popular in the past with funding disappearing fast. That’s likely to be true of the new scheme too and clearly Firstbuy won’t change the face of the market but it should be helpful for those that can access the scheme and be welcomed as another option for first time buyers struggling with tough deposit requirements.