Broon plans to bung cash to 1st time buyers


Taxpayer will give £1bn to help first-timers get a mortgage
By Brendan Carlin and Sarah Womack
(Filed: 23/05/2005)

Up to £1 billion of taxpayers' money is to be spent subsidising mortgages to help first-time buyers own their home, Gordon Brown will announce this week.

The shared-equity plan, to enable as many as 110,000 more people to buy properties by 2010, will be coupled with an announcement from John Prescott of a significant expansion of house-building targets, to deflect fears of the scheme simply stoking house-price inflation.

The scheme will be open to any first-time buyer
There is already a publicly-funded shared-ownership scheme to help key public sector workers get on the property ladder, but it has had limited effect.

A report published last week by Halifax, Britain's biggest mortgage lender, said nurses, teachers and police officers had been priced out of the housing market in three quarters of urban areas.

The new scheme, to be unveiled on Wednesday, is a much more ambitious, Government-backed, shared-equity programme. It will be open to any first-time buyer.

Treasury sources suggested that "tens of millions of pounds" of public money would be set aside to set up and administer the plan, with the cost likely to be more than £50 million in a five-year period. However, there is no formal limit to the subsidy nor to the price of homes to which it will apply.

The scheme, which could involve couples having to raise as little as half the cost of a home, is the result of a deal struck between the Government and the Council of Mortgage Lenders.

Typically, buyers would have to find 75 per cent of the cost, with the rest of the equity shared equally between the Government and the mortgage lender, or possibly the house-building company. Buyers would pay a "rent" on the part they do not own, with the option to buy the whole stake.

Mortgage companies will administer the scheme but Treasury sources confirmed yesterday that the Government was effectively underwriting the deals. If the property price were to fall when a house was sold on, the Government would be the first in line to lose its stake.

However, a Treasury source said that the prospect of public money being lost overall on transactions was unlikely.

If anything, the Government would probably get back more than it had invested, the source signalled.

Speaking on the BBC yesterday, the Chancellor raised the prospect of one million more people becoming homeowners by the end of this Parliament, both from the new shared-equity plan and from other measures to encourage home-ownership.

Over time, three out of four people could own their own home, Mr Brown said.

Halifax welcomed the scheme, saying: "The housing market depends on first-time buyers. Without them, it slows down, so initiatives like this are very, very good."

Both the Council of Mortgage Lenders and the Home Builders' Federation greeted the plan, but added that more house building was also needed to stave off the danger of feeding house-price rises.

It is understood that in Wednesday's joint announcement with Mr Brown, Mr Prescott, the Deputy Prime Minister, will unveil new home-building plans, partly in line with the Treasury-commissioned Barker report which, last year, said England needed 1.4 million more homes than planned over the next 10 years.

A Government source said under Mr Prescott's plans, "there will be a target set for the numbers of new houses built each year. It will represent a significant increase on current arrangements".

George Osborne, the shadow chancellor, issued a guarded welcome to the shared-equity plan as in line with Conservative principles but gave warning that the scheme might be "too complex or restrictive".

Vince Cable, the Liberal Democrats' Treasury spokesman, accused Mr Brown of "reinventing the wheel", given that housing associations already had such schemes but had run out of money.

Adam Sampson, of the charity Shelter, said the plans could result in subsidy "being directed away from providing housing for the poorest, in favour of enabling people who very often already have adequate housing to profit out of home ownership".
And this won't drive house prices up higher? Or is it simply a crude way to buy the votes of young professionals in time for the next election?
Another way for the Government to interfere in something that they shouldn't. House prices would find their own natural level if they left the bloody housing market alone. If they want to control the prices then they should legislate to limit the level of borrowing available. The Base Interest Rate is too blunt an instrument to control it as it also effects the level of investment for businesses and this new scheme is going to be inflationary because it will mean that there will be a higher demand for houses with no new housing development programs.

On top of that, who's going to fund all of these nice long-term loans? I believe that some of it will be from the banks and building societies, but the rest will (mostly) be from the tax-paying mugs who either don't own their own homes, or own them without the benefit of these loans!
Yet another Labour scheme to tie folks to Labour, the party who gave national health and social security but never fully funded them, with all th poblems that now become more and more apparent as the years go by.

Does this mean if my home is about to be re possesed for whatever reason, GB will step in and loan me the neccessary cash.
I believe it is an attempt to artificially bolster the housing market as we all know, high house prices mean consumer confidence and lots of money spent in the shops. Am I being cynical thinking this is an attempt to get some confidence into the ailing economy?

Will this schemebe open to all? I imagine it willonly be for those on low incomes. What about the large proportion of people on "good" wages who still cannot afford to buy in the south?

I can also see this will come back to bite the country in the arrse. At present, many people pump huge sums into buying a property and then rely on that for retirement. Under this scheme, they will have less cash tied up in property but how many will use the money saved to properly save for their twilight years. Not many I should imagine. We would then end up with more people who have inadequate fund to see them through old age and ergo, a greater pension burden on the workforce.
I would imagine that for those on "low" incomes being able to afford their own home will be just as far out of reach as ever.
Biscuits is right. In the very short term it will put more people in the position of being able to afford housing. However, the laws of supply and demand will mean that with more people looking to buy, the price will go up. Suddenly, people will again be priced out of the market. All it will do is inflate house prices meaning that their is consumer confidence build on perception not substance. Boom and Bust here we come.
You know I'm starting to actually welcome the idea of the "bust".
I too love busts.
A nice bust now would show the country that actually Neue Arbeit have slowly strangled the economy, but since they have been the beneficiaries of such a benign international financial situation, they would have had to be utter numpties to make a total mess of it over the last 8 years.
It's going to be interesting when it happens (and it will sooner or later).

Our economy is rather "plastic", very little solid, practical industry and a fast declining agricultural sector.

I predict a lot of people taking "chav" lessons.

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