How is Government Improving the Housing Situation?
The Government has admitted there is a massive problem in the UK with regards to affordable housing. House prices are higher than ever before and despite rumours of a fall in house prices in the next year or so potential buyers know they cannot rely on this happening. The Government needs to take action in order to prevent the house-buying culture in the UK from dying out. To do so it has come up with a number of initiatives that are aimed at helping would-be home owners to get on the property ladder.
The Home Buy Scheme
One initiative is the home-buy scheme. The scheme is aimed at key-workers and tenants looking to buy their first property. It consists of three products; Social Home Buy, New Build and Open Home Buy.
What is Social Home Buy?
Social Home Buy is aimed at tenants (council or housing association) who are not eligible for the Right-to-Buy scheme i.e. because they have not been in the property long enough or because they cannot afford to buy the whole property. Social Home Buy allows the tenants to buy a share in the property meaning the own at least part of their home.
What is Newbuild HomeBuy?
The New Build scheme applies to newly built properties, as the name suggests. Buyers can purchase a 25 per cent share of the home to begin with if they cannot afford to buy the home outright. The remaining share belongs to the housing provider i.e. the company which built the homes.
What is Open HomeBuy?
Open HomeBuy consists of three different products. One is in partnership with the Government alone, one if in partnershhip with the Government and Yorkshire Building Society and one is in partnership with wither Halifax, Advantage or Nationwide.
Government Alone Partnership
With the product in partnership with the Government alone the borrower receives a loan from the Government of up to 17.5% of the purchase price. The borrower then gets a mortgage for the remaining cost of the property. Due to the equity loan from the Government the sum needed from the mortgage is less and therefore the buyer should find it easier to get a lender to lend the money.
Government and Halifax/Advantage/Nationwide partnership
With the partnership with one of the private lenders the Government will offer a loan of up to 12.5% and the lender will offer the same giving the borrower a total equity loan of 25%. He or she then takes out a mortgage for the remaining amount.
Government and Yorkshire Building Society Partnership
With the partnership with Yorkshire Building Society the borrower will receive a loan of up to 15% of the property price from the Building Society along with 17.5% loan from the Government giving the borrower a total equity loan of 32.5%.
There is no interest on any of the loans but if the price of your house increases the amount you must pay back to the quity loan provider increases with it.
These products are ideal for borrowers who cannot afford to take out a mortgage for the full price of the home but want to own at least part of the house.
What is Right to Buy?
The Right to Buy scheme is another initiative from the Government aimed at helping council tenants to purchase their home. The tenants are given a discount on the purchase price in order to make the house more affordable.