Halfway house on the road to a place that's all yours

Be in no doubt that first-time buyers are being wooed.

Be in no doubt that first-time buyers are being wooed.

In the past few months, we've had loans for 130 per cent of a property's value; Ikea's plans for cheap flat-pack housing developments; mortgages (from Bristol & West) that let buyers borrow nine times their salary with help from parents; and John Prescott, the Deputy Prime Minister, encouraging developers to build homes for just £60,000 each.

Oh, and Chancellor Gordon Brown recently doubled the level at which stamp duty becomes payable on the purchase value of a property - to £120,000.

And last week, Mr Brown pitched in again with plans to extend shared ownership - the scheme that lets you take out a mortgage to buy a part-share (as little as 25 per cent) in a home owned by a housing association.

On the share that you don't own, you have to pay rent to the local authority; after a year, you can buy more equity at the current market value, until you own all the property.

The Chancellor now plans to extend shared ownership to private homes bought and sold on the open market, including new builds on former public-sector land. Borrowers will be allowed to raise as little as half the cost in the shape of a mortgage, with the rest split between the government and the mortgage provider.

As before, the option remains for people to buy outright at a later date if they can afford to. It's also likely that they'll have to pay some rent on the part of the property they don't own. (The details here are subject to consultation, and have yet to be decided.)

If, in the future, the householder chooses to sell the property, they will receive a share of the sale proceeds according to their individual stake.

What makes the scheme even more attractive for those trying to get on the ladder is the promise that if the housing market slumps, and the value of the property at the time of resale is less than the original purchase price, the government will be the first to lose out on its stake.

It is estimated that up to 100,000 people could benefit from the initiative over the next five years. But who will these new homebuyers be?

The Office of the Deputy Prime Minister says it plans to target "key workers" and "other first-time buyers", but gives no further details.

"The Chancellor will need to lay down clear guidelines on how the scheme can be policed and marketed to ensure it is used by genuine first-time buyers," says Peter Gladdy, director of Mortgages Direct broker, a subsidiary of Spicerhaart estate agents. "It is not enough to leave it to the discretion of banks and building societies."

What is clear is that the Government wants to extend the remit of its policy to offer low-cost housing beyond key workers such as nurses and teachers.

"The downside of existing shared ownership schemes is that they are so restricted - around 90 per cent of people are excluded," says Melanie Bien, associate director at broker Savills Private Finance. "This initiative will broaden the scope."

The Chancellor claims the scheme already has the backing of around 40 per cent of the country's mortgage lenders.

"It's good to see the Government putting affordable home ownership high on its agenda," says Peter Williams, deputy director general of the Council of Mortgage Lenders.

"But it's still a modest contribution in the context of well over a million housing transactions [taking place] a year."

Reaction from the Halifax bank and Nationwide building society - the UK's two biggest mortgage lenders - is muted. They are cautiously supportive, but both prefer not to comment until the full details have been revealed later in the summer.

Others in the industry are more vocal. Matthew Wyles, at Portman building society, says that helping the 100,000 households targeted by the scheme will barely scratch the surface of the home-ownership problem. Commercial viability also needs to be looked at, he warns.

While the Government refuses to be drawn on details until the consultation period ends next month, it wants to allay fears over one issue - property supply. Critics point out that subsidies for first-time buyers will only increase demand - thereby forcing prices up - unless the housing supply itself is increased.

On Wednesday, Mr Brown said he expected 200,000 new homes to be made available this year - the highest rate for 15 years. To do this, more land is being made available to developers and planning decisions are being speeded up.

PRICED OUT: A CHARITY WORKER COUNTS THE COST OF CARING

Frances Goddard, 24, from Queens Park, north-west London, is a struggling first-time buyer trying to get a foot on the property ladder.

Frances, who is employed by a charity, thought she would qualify for help as a key worker under the Government's existing Homebuy scheme. But on enquiring, she found she was not eligible.

After contacting FirstRungNow, a service that helps first-time buyers, she was advised to register with her local housing trust. She is now on its waiting list.

"I want to stay in the area but don't want to go on putting money into nothing by renting," she says. "The problem is, there simply isn't much social housing on offer here."

Frances says the Government's latest shared ownership scheme sounds like a good idea in principle.

"I took a job with a charity because I wanted to do something worthwhile," she explains.

"But instead, I just feel like I'm being priced out of London - and left with no choice but to get another job if I'm ever going to buy a place of my own."

She says this situation could change if she were to benefit from the Government's proposals.

"The plans to help 100,000 first-time buyers take the first step are potentially a good idea. But, once again, I'll have wait and see if I'm eligible."