Government HomeBuy Direct initiative is seen as potential lifeline for housebuilders
Over a hundred developers have signed up to take part in a £400m shared ownership scheme designed to breathe life back in to the housing market.
The government announced today that 130 house builders will join the HomeBuy Direct scheme which will reduce the starting price for first-time buyers on 18,000 homes by 30%. Funding for the scheme has been upped from £300m to £400m because of the scale of the response from housebuilders who see the product as a potential lifeline in the current market.
The scheme will see builders and the government each take a 15% equity stake in a new property with the homebuyer paying the rest.
The scheme will be administered by 23 previously approved HomeBuy “agents”, with applicants free to apply for help in house purchases from early in 2009.
Housing minister Margaret Beckett said the deal would put first-time buyers within reach of becoming homeowners. She said: “This scheme will also help developers to weather the tough times in the market, by protecting jobs and helping to keep business going."
The way the deal is structured means the “equity loan” from government and builders takes the hit if prices fall, providing mortgage lenders security that they won't be left with homes worth less than the value of the mortgage on them. As with other “HomeBuy” products, the scheme is eligible for first-time buyers with a household income of less than £60,000.
The scheme was worked up by the communities department in conjunction with the Home Builders Federation (HBF). Stewart Baseley, executive chairman of the HBF said the announcement was “great news.” He said: “HomeBuy Direct will assist to both deliver desperately needed affordable housing, and protect housebuilding industry capacity - so vital if we are to provide the houses we know this country needs in the future.“
He added: “We now need to see further steps taken to restore mortgage provision, with urgent action on Sir James Crosby's recommendations a necessity."