First-time Buyers
A guide to key worker schemes
Despite the credit crunch, help could still be at hand for key workers looking to buy as Barney McCarthy finds out
As a first-time buyer in the current climate, home ownership may seem like an exclusive club with a pair of particularly surly bouncers on the door. Even if you have some money in your pocket (a deposit) and a smart appearance (a blemish-free credit record), those in control may decide to exercise their right to refuse admission. With lenders axing 125% mortgages and the amount of mortgages available shrinking, it feels like a case of “not tonight”. But before you decide to call it quits and turn on your heels, it may be worth bearing in mind something that could well act as your VIP pass into the promised land.
Key worker schemes have long existed as a government-led affordable housing initiative for those in certain professions such as NHS staff, teachers, social workers and firefighters. One of the main initiatives geared towards helping key workers is Open Market HomeBuy (OMHB). The scheme works by giving participants an “equity loan” to help them buy a home. The lender owns part of the property and shares in any rise or fall in its value. Initially launched in 2005, OMHB was revamped in April 2008.
New and improved
Previously, OMHB loans could only be taken out in chunks of 32.5%, 25%, or 17.5% for the Government-only loan. The loans were also restricted to one specific mortgage from each of the three lending participants. However, changes to the scheme announced in the last Budget resulted in more flexibility in the percentage of the value of the property that can be borrowed – to a maximum of 50% – and more choice in the actual mortgage products available. This equates to a household with an income of £32,000 being able to afford a home worth £200,000, repaying £760 each month.
Housing and planning minister Caroline Flint says: “We have helped more than 95,000 households onto the housing ladder since 1997 through low cost home ownership schemes. These new products should help even more people by increasing affordability for key workers.”
The extension of the scheme was also accompanied by the unveiling of cash grants of £1,500 to buyers taking up a shared equity loan under the OMHB scheme. More than £3m has initially been earmarked for the first wave of grants to help with the costs associated with setting up a new home such as legal charges, fees and furniture.
Your Mortgage Awards 2024/25: winners revealed
Post Views:
Sponsored by Your Mortgage Awards
Helping hands
Other new products launched under the revamp include MyChoiceHomeBuy, an equity loan of between 15 and 50% of the purchase price. This is provided in partnership with a consortium of eight housing associations and can be used in conjunction with any conventional mortgage. Ownhome is an equity loan of between 20 and 40% of purchase price, which can be used in conjunction with any Co-operative Bank mortgage.
However, Louise Cuming, head of mortgages at comparison site Moneysupermarket, says the schemes are still restricted in who they help. “Equity share mortgages are a good option in principle, but they benefit so few borrowers that they are of absolutely no use for reigniting the stagnating mortgage market,” she says. “The choice of products under this scheme remains limited and it can be difficult for customers to find a package that suits them. Should you be lucky enough to find a suitable product, you will be faced with a lengthy and complicated application process.”
A further scheme earmarked for key workers is New Build HomeBuy. Under this initiative, you buy at least 25% of the property and the house builder charges you up to a maximum of 3% per year on the value of the property. As such, it owns the lion’s share of the property. You can then buy further shares of the property at market value if and when you are able to afford it.
All of these schemes are not exclusively open to key workers, but do tend to target these professions. Outside of the specified occupations, you may have a chance of getting on a scheme if you are a council or housing association tenant or have been identified as a priority first-time buyer who can’t afford to buy a property – those in this group include people helping the local community or economy.
So, it seems that although such schemes have expanded in recent years, there’s no guarantee that all applicants will be successful. If you are hoping to get on the property ladder any time soon, however, it won’t hurt to check out the details of any schemes available in your local area, you may find that there’s one to suit your needs.