Open Market HomeBuy Gets A Revamp

The Government’s scheme to help key workers buy their own homes is to undergo a revamp. After only 2,000 have bought their homes through the Open Market HomeBuy scheme, the Government is to give it a boost by making the interest rate only 1.75% on half of the property.

The intention is to help key workers, who include nurses, teachers, police and social workers get onto the property ladder.

The revised scheme is due to come into force on 1 April, and will enable buyers to combine a conventional mortgage from a bank or building society for 50% of the property with a loan partly funded by the Government at the new low interest rate.

At the moment the rules of the scheme mean that buyers need a mortgage for two thirds of their home, and critics have pointed to this being too high and the reason why the uptake has been so low.

The new rules will mean that anyone seeking to buy a house valued at £300,000 will only need to look for a mortgage for £150,000.

A homebuyer taking out such a 50% mortgage would have to pay interest on the loan for the rest of the funding from day one, and this would be the new low rate of 1.75%. This rises to RPI inflation plus an additional 1% (currently, therefore, 5.1%.

The Government has pointed to its Open Market HomeBuy scheme as a key part of its strategy to help people buy their own homes, but the figures hardly back up that view. Last year, of the 358,000 first-tie buyers, a mere 0.6% of purchasers used the scheme.

The Government had a target of getting 20,000 people into home ownership by using the scheme in its first five years, but up to the end of February last year, only 200 had bough a property using the initiative.