Posted on 10th November 2012

A Mixed Market for First-Time Buyers

Martin Williamson, Head of Residential PropertyAs I have mentioned in previous columns, there are many schemes available to first time buyers. These include the FirstBuy scheme, which allows people to take out a mortgage for just 75 per cent of the cost of the property, and NewBuild, which gives First Time Buyers (FTBs) with only a 5% deposit access to mortgages for new-build houses. All of this is good news, of course, however are these schemes really helping first-time buyers and stimulating the housing market?

The Governments Funding for Lending scheme, which was launched at the start of August, has had a shaky start. Only seven more mortgages are available to the market for first-time buyers with a 5% deposit than there were prior to launch.

The £80billion scheme was promoted with much fanfare, as a real opportunity for young people to get on the property ladder by providing lenders access to cheaper funding. In reality, all the scheme has served to do is pad out the already well catered for middle ground for mortgages with a base-line 20 to 25% deposit.

Despite this, there are still several realistic forms of assistance for young people wanting to jump on to the first rung of the property ladder.

The first is the Bank of Mum and Dad route, which I have referred to in a previous column. Recent figures from HSBC show that £5.3 million worth of FTB property sales would not have gone ahead last year without finance from the Bank of Mum and Dad. However, this represents only a small slice of the mortgage market as in reality only 19% of FTB purchases would not have gone ahead without loans from family members, so clearly young people are using other methods.

The Government-led FirstBuy scheme was recently re-launched for another round of allocations from a £280 million pot. This was clearly aimed at stimulating both the property market and the construction industry, with clear benefits for FTBs.

Housing Minister, Mark Prisk, said he hoped that up to 2,500 FTBs will be assisted by FirstBuy. The FirstBuy scheme has the added appeal of offering a staircase opportunity after a year. This offers the homeowner the opportunity to purchase a minimum of 10% to a maximum 100% value of the property.

Another option is the HomeBuy scheme, which is a very popular way of buying for people who are currently renting from a housing association.

In summary, there are several initiatives out there, as well as the move by many banks to re-introduce special rates for FTBs. Combine this with the news that house prices fell for the fourth consecutive month in August and it shows that now is as good a time as any to access the first rung of the property ladder.

Martin Williamson is Head of Residential Property at Latimer Hinks Solicitors in Darlington. Latimer Hinks has a team of around 40 people serving private and corporate clients. For further information: or call 01325 341 500.