The Government announce Rent to Homebuy Shared Ownership Schemes

Last month we reported how the Government had opened up shared ownership schemes to all first time buyers who earned a household income of under £60K and now we can report on a new scheme that allows first time buyers to rent a property as they save to buy.

The pilot scheme will allow first time buyers to rent a property at 80% or less of the real market price for two or three years, whilst building up a deposit to put down on a property.  Again, the annual income of the property must be under £60K and the scheme will be managed by the Housing Association and therefore certain criteria must be met in order to qualify.

Once the buyer has saved enough and can afford to do so, they can begin to buy a share of the property, starting at 25%, and then continue paying rent on the remaining percentage.

Eventually the buyer can purchase the full 100% share in the property or they can move at take the equity that they have built up to another property.

The idea behind this scheme and the original plan to open up shared ownership mortgages to first time buyers has been born out of the fact that first time buyers are the worst hit by the credit crunch.

The Rent to HomeBuy scheme, as it is being heralded, is designed to give more choice and flexibility to first time buyers, who are often left wondering whether they are ever going to be able to get onto the property ladder.

At the beginning of 2008 100% mortgages, which were created to help FTBs to get onto to the property ladder, have been withdrawn from the market and now most mortgages require a deposit of at least 10%.  Considering that the average house in the UK has been priced at £180K, this would mean getting £18K together and this doesn’t take into account the cost of fees and stamp duty.

Regardless of the falling house prices, first time buyers are still up against it when looking to buy.

The Government have said that they are determined to help first time buyers and promote fairness and long term stability in the housing market.

The Rent to HomeBuy option will be attractive to developers, who have taken a hit over the past few months as well as housing association who are having to meet the housing needs of many within their local constituencies.

Although many are championing these schemes, the shadow housing minister has blasted the Government.  Grant Shapps has stated that given the recent increase in stamp duty and the introduction of pointless redtape (Hips), are we now to believe that the Government are on the side of those who want to get onto the property ladder.  He has called the Government to write off stamp duty for 9 out of 10 first time buyers and abolish Hips altogether.

The argument will continue to rage until first time buyers, who are forever being persecuted, get a real break.