More choice for Open Market HomeBuy mortgages – competition announced in Budget

Housing Corporation News Release

More choice for Open Market HomeBuy mortgages

21 March 2007 Ref: 33/07

A new competition to increase the number of lenders who will provide shared equity mortgages and help more people on low incomes onto the housing ladder was announced by the Chancellor in the Budget today (Wednesday 21 March).

The competition aims to provide a wider choice of shared equity mortgages for homebuyers through the Open Market HomeBuy scheme. The scheme currently provides equity loans, funded by the government and mortgage lenders, which boost the purchasing power of the homebuyer.

The Housing Corporation today published an early invitation to mortgage lenders, investors and housing associations to participate so they can prepare competitive products, consult with the government and give feedback for the development of the competition.

The invitation makes clear the Housing Corporation would welcome the development of an affordable and sustainable equity loan for households who are only able to purchase around a 50-70% share.

Housing Minister, Yvette Cooper, said,

“Rising house prices can put real pressure on first time buyers. That is why it is so important to provide extra help for people to get on the housing ladder through shared equity mortgages.
 
“By inviting more mortgage lenders and others to join Open Market HomeBuy, homebuyers will get even more financial choices from a greater range of providers when looking for a home to call their own.”

By providing affordable housing products in partnership with mortgage lenders the government is able to help even more people who, without the scheme, would not be able to buy a home they can afford. The new competition will help the Housing Corporation assist even more households into home ownership, and bringing closer the target of helping 160,000 households to become home owners between 2005 and 2010.

The competition will aim to be attractive to a wide range of organisations, including mortgage lenders, institutional investors and housing associations.  It offers an opportunity for the market to engage with the Housing Corporation to create innovative and viable financial products to deliver affordable home ownership.  CB Richard Ellis, the real estate advisor, has been selected by the Housing Corporation to market, launch and evaluate this competition.

Housing Corporation Chief Executive, Jon Rouse, said,

“Over 85% of households aspire to be home owners, but affordability stops some groups in society – particularly those on low incomes -  from achieving their aspirations.  The Shared Equity Task Force report sets a challenge for the Corporation to build further on the partnerships we already have with the private sector.

“The competition which the Chancellor has announced today will enable us find  a wide range of institutional, lender and housing partners to fund innovative and effective solutions to help more people into affordable home ownership.”

Ends.

Notes to Editors
1) For further press information, please contact Katy Nicholson on 020 7393 2118.

2) Subject to the spending review timetable, the competition will launch in Summer 2007.  In the

http://www.davidcastle.org/BB/

I wonder why??

Lenders must be feeling the pinch!!

YBS launches new 115% LTV mortgage

The Yorkshire Building Society (YBS) have announced the introduction of a new no-deposit mortgage.

The new offer would allow a maximum of a full 15 per cent above the property value to be mortgaged.

Ian Bullock, sales and marketing director of YBS, said that the current interest rate environment had made it “increasingly difficult for young people to get on the housing ladder”.

He also claimed that the new 115 per cent loan-to-value deal would allow first-time buyers to cover extra costs such as legal fees and stamp duty:

Mr Bullock acknowledged, however, that such mortgages generally prove a higher risk for lenders.

He added: “Whilst there is undoubted demand for this type of lending we feel that we have to demonstrate to customers that we are acting responsibly in ensuring that they do not over commit.”

The new mortgage is also aimed at those homebuyers who do not qualify for the Government Homebuy scheme, which was introduced last year to provide financial help to keyworkers and other target groups to get on the property ladder.

http://www.chdinfo.com/blogathon/blog/

http://www.counciltenantsmortgages.co.uk/shared-ownership.html

Two equity loans, each worth around 12.5% of the value of your home, are provided:

• the first is provided by the same lender that you select to provide your conventional mortgage loan; and
• the second is provided by the Government and administered by a HomeBuy Agent – a housing association in England that has been appointed to operate the scheme.

No interest is charged on either of the equity loans for the first five years and you will never be charged interest or need to make monthly payments on the HomeBuy Agent’s equity loan. However, the amount you will have to repay the lender and the HomeBuy Agent will be linked to the value of your home at the time you sell it, plus a redemption fee where this is levied.

The effect is similar to a loan under which you pay credit charges at the rate at which your home has increased in value. As an illustration, if your home increases in value by 4% or 8% a year, the sum you will repay will be equivalent to borrowing under a loan with an APR of 4% or an APR of 8%. The amount repayable would include a redemption fee, where that is charged.

Who is eligible and what are the selection criteria?

The main groups of people to be helped by the scheme will be:

• existing tenants of housing associations and local councils;
• people on housing waiting lists for social rented housing who are nominated by their local council as being in housing need;
• key public sector workers in London, the South East and the East of England; and
• some other priority first time buyers.
 
“Key public sector workers” currently include clinical NHS staff (with the exception of doctors and dentists); teachers and nursery nurses in schools and further education/sixth form colleges; police officers, Community Support Officers and some civilian staff; Prison Service staff in certain prisons; Probation Service staff; social workers, nursery nurses, educational psychologists, and therapists (e.g. occupational therapists) employed by local authorities, CAFCASS or the NHS; local authority planners; and firefighters and other uniformed staff below principal level in Fire and Rescue Services. Key public sector workers must be based in London, the South East or East of England to qualify for the scheme.

One of the major Mortgage Brokers within the Homebuy scheme is Council Tenants Advice Bureau (UK) Limited and were featured in the April 2007 edition of ‘Niche Mortgages Magazine’. CTAB have been established for nearly 20 years and their website www.counciltenantsmortgages.co.uk is now one of the most searched websites on all Homebuy issues.

First time buyers are given a hand to get on the housing ladder

A triple council partnership launched in the Golden Square Triangle of sky-high house prices is proving popular with house buyers aiming to get a foot on the property ladder.
The triangle is a link-up by Harrogate Borough Council and the city councils of Leeds and York said to be the only scheme of its kind in the country.

It is funded by £7.5m from the Yorkshire and Humber Regional Housing Board.
Dubbed Homebuy Plus the scheme has already created “huge interest” since starting in January.
Already more than 500 people have registered their interest in the project.
It comes at a time when modest two bedroomed terrace homes in Harrogate are being advertised for £180,000.
Coun Jean Butterfield, cabinet member for housing in Harrogate, said:
“Residents in the Golden Triangle are getting a better deal as a result of the partnership.
Homebuy schemes in other parts of the country can only access 25 per cent discount – hence the title of this scheme Homebuy Plus, only available in the Golden Triangle area.”
Other schemes set to come on stream in the partnership are aimed at getting people into home ownership, relieving the burden on local authority housing provision.
Schemes are also being delivered increasing the number of affordable properties for rent.
The Homebuy Plus scheme is being jointly funded by the Golden Triangle Partnership and Northern Counties Housing Association.
Meanwhile interest is said to have dipped in the government’s Open Market Homebuy scheme.
Coun Butterfield believes this is because of the complicated and restricted process.
“This contrasts with that of the Golden Triangle’s special Homebuy Plus scheme which offers a bigger equity loan, is easier to access and charges no interest.Our scheme is definitely bucking the national trend.”
The Government’s Open Market Homebuy scheme has failed to attract the very people it was meant to help, she said.
“The 25 per cent equity loan, which Open Market Homebuy offers is simply not enough in high value areas such as Harrogate where property prices recently averaged at £255,679, a staggering 12.7 times the mean gross income of local workers,” pointed out Coun Butterfield..
In contrast Homebuy Plus offers up to a 45% equity loan.
“People want a hand to get on the housing ladder but not at any price. That is why Homebuy Plus is definitely a better deal for customers who are beginning to realise it. And this has led to a greater demand for the Partnership’s scheme,” she added.
Harrogate, along with Leeds and York councils, intends to share its experiences with with other councils and regional government as a model of best practice which can be adopted and implemented across the country.
Meanwhile Homebuy Plus will allow applicants to get a mortgage from any qualified lender rather than borrowing from one of only four named lenders under the government’s scheme.
* Detailed information about the Golden Triangle Homebuy Plus scheme is available from Alan Jenks, Head of Housing, Harrogate Borough Council (01423 556849).

http://www.lbhf.gov.uk/Images/Homebuy_Product_Details_for_Website_tcm21-74330.pdf

Council rejects home-share plan

A NEW Government scheme which allows council house tenants to buy a part-share in their home will not be adopted in Rotherham because council officials say there would be too little demand.

The scheme is a development of the right-to-buy system introduced by the Conservative Government of 1980, which has resulted in many thousands of council homes passing into private ownership.
It is attractive for longstanding tenants because it allows them to buy the home they already live in at a discounted rate.
Now councils are being offered the chance to adopt a refined version of the scheme, which would allow tenants to enter a shared ownership deal with the council.
A benefit of the system is that it would allow tenants to buy their home in stages, taking slices of the house as they could afford to do so.
But a report to senior councillors in Rotherham states: “Rotherham does not share the south east of England’s concerns over increased house prices, resulting in key workers, first-time buyers and social tenants being unable to enter the housing market.
“The take up of the scheme would not be sufficient to cover administration and re-investment costs.”

CTAB state ‘This seems a backward step for the tenants of Rotherham – House prices have put the Right to Buy out of the reach of many would be buyers. We will liaise with the Council on this matter.