More help for home buyers

Two new products backed by the Government and announced in last month's budget have been launched by the Housing Corporation.

As part of the Government's Open Market HomeBuy initiative, both offer key workers and other first time buyers access to an equity loan of up to 50 per cent of the property's value.

Eligible applicants have a choice between finding their own mortgage or picking a competitive deal through the Co-Operative Bank.

Ownhome is provided by a partnership between Places for People and the Co-operative Bank. Ownhome gives people the chance to take up to 40 per cent of the value of the property in an equity loan from Places for People.

They would pay nothing at all for the first five years on the equity loan. After these five years, a low rate would be paid on the sum - starting at a fixed rate of just 1.75 per cent interest per year for the next five years, and then increasing to 3.75 per cent interest per year from year eleven.

The remainder would be funded through a conventional mortgage with The Co-operative Bank.

There will be no premium or extra charges on the mortgage, and customers can choose from a range of competitive deals including fixed rate and tracker options. Customers can apply for Ownhome through their local HomeBuy Agent, or directly on the Ownhome telephone line 0845 607 0110.

MyChoiceHomeBuy enables applicants to apply for a mortgage with any lender they choose. The scheme would provide them with up to 50 per cent of the value of the property as an equity loan.

The remainder would be funded through a conventional mortgage with a Financial Services Authority regulated lender. They would pay a low rate of 1.75 per cent per annum on the equity loan funded by one of eight housing associations who are acting as equity loan providers. The rate they pay on the standard mortgage would depend on the deal selected through the mortgage providers.

With both products, no deposit is required, but is allowed. When the property is sold, the equity loan provider will be entitled to a share of any increase in the value of the property.

Although mortgage rates are still low, rising house prices and the decline of first time buyer-specific mortgages has put pressure on people buying their first home - particularly key workers.

This means a household with an income of £32,000 could afford a house of £200,000, paying £760 each month - as opposed to £1,350 without the scheme.

Chief Executive of the Housing Corporation, Steven Douglas, said, "The Government's Housing Green Paper outlined plans to build more new affordable homes. In addition, the Government is committed to helping people who are seeking a home to meet their needs right now.

Initiatives like Open Market HomeBuy are designed to give key workers and other first time buyers a vital helping hand on to the housing ladder, offering people the flexibility and accessibility they need."

The Open Market HomeBuy initiative allows the buyer to choose any property on the open market within their price range. It is available to key public sector workers, social tenants or those on a council waiting list and other priority first time buyers.

Applicants will need to contact a HomeBuy agent - a one-stop shop providing affordable housing options across the UK - or phone the Ownhome information line on 0845 607 0110.