Nigel Glossop of Alexander James Mortgage Services comments on the Government’s latest announcement.
The Government appears to have a case of ‘new year, new me’ syndrome this month after it announced that it is to fast-track the building of thousands of new homes on publicly-owned land.
This Thatcher-esque approach (a throwback to the urban development corporations [UDCs] that were set up to rejuvenate housing in the London Docklands and Merseyside areas in the 1980s) has been deemed ‘radical’ by the Government, specifically David Cameron.
Radical? Possibly. Needed? Most certainly.
They have stated that builders will begin working on the 13,000 homes in Dover, Cambridgeshire, Chichester and North West London this year, with 40% of them being ‘starter homes’.
The £1.2bn Starter Homes scheme has been spoken about since this time last year, with the Government setting its own target of building 200,000 of them by 2020, and has been designed to help combat the severe lack of properties that continues to drive prices up, thus helping first-time buyers get on to the property ladder.
Cameron stated that the package signals a ‘huge shift in Government policy’ and that the Government actively getting homes built in this manner has not been seen in three decades.
That may be the case, but there is no reason for Cameron and the rest of the Government to pat themselves on the back just yet.
According to the Office for National Statistics (ONS), the average price a first-time buyer will pay for a property is £202,765; with the Starter Homes discount, this would be reduced to £162,212.
With many lenders offering 95% mortgages outside of Help to Buy to increase competition, when Help to Buy ends in 2020, there is a chance that lenders may also retract their 95% mortgages.
This could mean that a Starter Homes property worth the average £162,212 would require a first-time buyer deposit of £40,553 – a substantial amount.
Of course, in the meantime, it is expected, though still not confirmed, that Help to Buy mortgages will be able to be taken out on Starter Homes properties which would bring that deposit right down to £8,110.
The big question that this raises, then, is does the Government have a plan in action for when Help to Buy ends? Without one, they could risk pushing the first-time buyer market back into decline.
Nigel Glossop is from Alexander James Mortgage Services – for further information, call Chancellors on 0333 6000 060.
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Correct at time of publication. The views and opinions expressed herein are those of the individual contributor and do not necessarily reflect those of the Chancellors Group of Estate Agents Ltd or its subsidiaries. References to legislation, best practice and other matters with legal implications such as fees, rules and processes are included for information and editorial purposes only and are not authoritative, nor should they be interpreted as advice. When in doubt you should only take advice from an industry professional or solicitor where appropriate. E&OE.