This is going to be known as Home Buy Direct and it is designed to help up to ten thousand first time buyers into affordable home ownership. The scheme is also designed to help participating house builders by enabling more first time buyers to purchase their newly built houses. £300,000,000.00 has been allocated to fund this.
Once launched Home Buy Direct will operate as follows:-
1. Developers will be invited to submit bids to the Housing Corporation to provide Home criteria and will have regard to regional housing strategies and any additional evidence submitted by the Regional Development Agencies about current housing market problems.
2. There will be twenty three regional Home Buy agents who will be the first point of contact for first time buyers who are interested in applying for the Scheme. Those eligible will be households earning less than £60,000.00 who could not afford to buy a suitable property on the open market without assistance.
3. Applicants will also be subject to an affordability check designed to access the size of the equity share that they are able to afford and sustain. Anyone qualifying for this scheme will then be invited to choose a Home Direct property available from developers.
4. The purchaser will receive an equity loan of up to 30% of the purchase price of the chosen property. This will be co-funded on equal terms by the Government and the developer supplying the property. The purchaser must then contribute the remaining equity (a minimum of 70%) through their mortgage and any deposit.
5. The equity loan will be free of charge to the purchaser for the first five years. From year six a 3% charge will be levied until the tenth year after which the Bank of England Base Rate will be charged increasing by RPI plus .5% each year.
6. Purchasers can redeem the equity loan in instalments purchasing up to 100% equity after their initial purchase by buying additional equity at the market rate.
7. Purchasers will be able to sell their home by Direct Home on the open market. When they do so they will repay the equity loan by way of a share of the proceeds of sale. This repayment will be shared equally between the Government and the Developer.
8. If the value of the property has increased by the point of sale the Purchaser, Developer and the Government will all share in this increase. If the value of the property has gone down the Government and the Developer will only share the sale proceeds that are left over once the mortgage has been repaid providing the purchaser with greater protection against negative equity.
This scheme is designed to help first time buyers, house builders and in general the housing market.
It is expected that the first Home Buy Direct homes will be available to purchasers in early 2009.