Starter Home Initiative Added:2015.04.07
Starter Home Initiative
First time buyers have been hit hard in recent years, as mortgage availability tightened substantially. The need for more significant deposits to benefit from the very lowest mortgage rates has made it hard for first time buyers trying to save for their deposit whilst also paying rent.
An improving market in the last 12 months has seen first time buyer numbers rise but many are still putting down large deposits to bridge the gap between purchase price and the available mortgage amount.
As prices in some areas have risen it means that some are beginning to question whether they will ever be able to buy. Higher prices just make it ever tougher to make the leap to home ownership.
Recognising this, there have been various attempts to stimulate the market to help those that can’t manage to pull together a big deposit or are struggling with affordability. The two Help to Buy initiatives, to aid purchases of new build with the help of an equity loan and to provide mortgage options up to 95% of the purchase price, have provided the central thrust of Government policy to tackle the challenges.
The latest effort to address the imbalance of supply and demand in the property market is the Government’s Starter Home Initiative. This aims to offer homes to first time buyers under the age of 40 at a discount of 20% from the open market value. The scheme aims to open up brownfield sites for development and to remove planning levies to enable good quality homes to be built and made available at the discounted price.
The scheme was originally announced last year with a plan to build 100,000 new starter homes. That has been revised with a recent commitment to doubling the original number of new homes to 200,000.
It’s too early to know how mortgage lenders will approach the new scheme although it would be a surprise if it wasn’t supported by major lenders. There is not enough detail available to know whether they might plan to offer standard mortgage deals or take a more tailored approach. With the Help to Buy equity loan some lenders have produced specific deals whereas others have adapted their standard range.
It will be interesting to see how the initiative takes shape, especially for those first time buyers seeking an alternative. Those that are interested in learning more can already register their interest online to keep abreast of developments. It may not solve the ongoing mismatch between supply and demand but could offer a valuable alternative to some who thought the chance of their own home was still a long way away.
Guild Mortgage Service, Provided by London & Country Mortgages
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