The Government’s proposals for housing as outlined in its green paper, Quality and choice: A decent home for all, has been met with a mixed response from the mortgage industry.
The paper lays down plans for a Starter Home Initiative that aims to provide assistance to first time buyers with low incomes. This includes the possibility of interest-free loans for key workers in the public sector, such as nurses and teachers in areas where house prices and demand is high.
As yet no details as to how the scheme could work have been published and the Government is emphasising that it is only a proposal that will be dependent on responses to the consultation paper.
But the national press has suggested the proposal will take the form of an interest free ‘top-up’ loan of up to £50,000 on properties below £125,000.
This has the potential to save a borrower with a £125,000 property more than £150 a month.
While the proposal makes great headlines and is a sure vote winner, Ray Boulger, technical manager at John Charcol is sceptical.
He said: “This proposal is clearly still in the early stages. Nurses and teachers are bound to think it is brilliant, but from a market perspective it could create as many problems as it solves.”
“This move will mean that a lot of extra people who previously could not afford to buy will soon be able to do so, leading to increased demand in certain areas. This is not a problem if increases in supply can meet the demand, but if there is an imbalance prices could go up.”
Steve Cowdry, media relations manager at Nationwide, said the building society was interested in how the proposal will take shape.
He said: “As a major lender we have a keen interest to see how this develops over time, but we also think that existing low cost home ownership schemes need to be evaluated to see where room for improvement lies.”
