Shared equity mortgages for 100,000 but at expense of homeless? |
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Mon, 23 May 2005 22:40
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Chancellor Gordon Brown has unveiled plans to offer first time buyers the ability to buy homes with government-backed, cut-rate mortgages. Brown says that around a 100,000 people will be able to buy homes in the "shared equity" scheme, which has been designed to allow poor families to buy a place of their own. Purchasers into this scheme will have to put up just half the purchase price.
These proposals are set to be announced on Wednesday and will allow people take out mortgages for anything between half and three-quarters of the price of a property. The rest of the equity is slated to be shared between the taxpayer and mortgage lenders.
Speaking at length about this scheme, the Chancellor said, “I think over the next parliament, with 100,000 benefiting from the shared equity scheme, we could probably have a million more home owners in Britain as a whole. And basically we are moving on to the next stage of our economic policy." Lenders and house builders welcomed these comments and assured their full cooperation.
Mr. Brown was in an expansive mood as he added, "We have created stability in this country, and now we must ensure that the benefits go particularly to young couples who want to own their own homes, who find that house prices have been high, who could benefit from low interest rates, but they need some help to get on to the first rung of the housing ladder. It means that people who couldn't afford the full price of a home can afford the partial price, and they can gradually ramp up their stake." One of the main points of the scheme is that buyers can buy their house outright if their finances improve.
| These plans are being put into effect as the government is taking note of the fact that first time buyers are not able to keep up with rising mortgage payments. Under this scheme average repayments on a £200,000 home would be potentially cut by up to £372 a month. For example, if a couple puts up 50 percent of a £120,000 house they would have to pay around £372 a month in mortgage repayment, add to this a rent of £150 a month, the total repayment is £522. Even this amount would be less than the £746 that they would have to pay towards a full mortgage on the house.
Sue Anderson, of the Council of Mortgage Lenders, was upbeat about this scheme but recommended caution when she said, "We've got to see more housing supply accompanying this, otherwise there's the risk that all you do is push up house prices further."
Mr. Brown will make a full announcement on Wednesday along with Deputy Prime Minister John Prescott and housing minister Yvette Cooper. He will also announce plans to release more land for house building and cut the costs of construction.
The plan is condemned by some groups as an attempt to artificially prop up the failing housing market and increase house prices further to encourage borrowing and spending by the public in light of recent consumer spending decreases and falling consumer confidence. Brown cannot allow this to happen as the increase in house prices are the single main factor in the UK's recent economic growth. It is however concerning that the government would try to interfere in the property market and any such move will cost billions and could only be maintained for a short period of time.
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