First time buyers have been given the chance to receive a 95% mortgage on new build homes, with a government incentive scheme that means the buyer only has to find the first 5%. The offer only applies to residences in England and is only open to first time buyers. The property must be a new build and the price not exceed £500,000.
The scheme also protects lenders in case of the need for repossession but does not change the home buyers responsibility of mortgage payments. The scheme is a partnership between the home building industry, mortgage lenders i.e. banks and building societies and the government, with the aim of helping first time buyers get a foot on the property ladder.
This could not have come at a better time owing to the current condition of the housing market. While this will help first time buyers it will also hopefully provide a much needed injection of movement into the property market. First time home buyers have been struggling to get a foot in the door for some time and the trend of having to live with parents or what the government referred to as Three G households i.e. three generations under the same roof, is still very much alive.
While it may be good news for first time buyers, it will not be much use to those trying to sell property quickly, as it is restricted to new builds only. The move may help people into housing but it will not help those who want to make a quick house sale to prospective first timers, as the banks simply will not lend them the money.
It is no wonder the trend of using a national home buyers or third party property agent is now so prevalent in the property market, for those who simply have not got the time to wait for the market to pick up and the banks to relent. Hopefully this incentive scheme will transfer to established properties as well as new builds if it takes off and this may well help kick-start the housing market again.