Housing Corporation Statement

12 March 2008       21/08

Key workers are given a helping hand onto the property ladder.

Two new products backed by the Government and announced in today's Budget are being launched today by the Housing Corporation to help thousands of key workers and other priority first time buyers buy their own home (Wednesday 12 March 2008).

The two new products, part of the Government's Open Market HomeBuy initiative, offer key workers and other first time buyers access to an equity loan of up to 50% 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% 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% interest per year for the next five years, and then increasing to 3.75% 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% 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 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."

Managing Director at Metropolitan Home Ownership, one of the eight housing associations equity loan providers for MyChoiceHomeBuy, Graeme Moran, said,

"We have tried and tested many products over the years, therefore MyChoiceHomeBuy has evolved out of years of experience.

"We are extremely excited to bring the product to the market, to enable first-time buyers to secure the home of their choice, with a mortgage lender of their choice, at an affordable price and in a location that suits their family and working needs."

Chief Executive of Places for People David Cowans said,

 "Ownhome is great news for first-time buyers, and gives key workers or those with young families the opportunity to take those first important steps on to the property ladder.

"The Ownhome loan from Places for People will cover up to 40 per cent of the value of their property, with no interest to pay for the first five years, while the Co-operative Bank will provide a choice of mortgages to cover the remaining cost.  There will no premium fees, charges or increased rates for Ownhome customers to pay on their mortgage, and no deposit will be required."

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.

For more press information please contact Nicole Davey on 020 7393 2118 or Sandra White on 020 7393 2094 or Katy Nicholson on 020 7393 2115 

Notes to Editors 

HomeBuy Agents are appointed housing associations who will provide a 'one-stop-shop' and point of contact for affordable housing options in a given area in England and handle the entire application process for the Open Market and New Build Homebuy products.

Contact your local HomeBuy Agent through the Housing Corporation's website www.housingcorp.gov.uk, or telephone the Housing Corporation's enquiries line 0845 230 7000.

Applicants for Ownhome can ring the dedicated Ownhome information line on 0845 607 0110

*The eight housing associations offering MyChoiceHomeBuy equity loans are: Aldwyck Housing Association Ltd, Bedfordshire Pilgrim Housing Association Ltd, Catalyst Housing Group, Metropolitan Housing Trust Ltd, Moat Homes Ltd, Swaythling Housing Society Ltd, Thames Valley Housing Association Ltd and Tower Homes Ltd.

Ownhome and MyChoiceHomeBuy will replace the three other products in the Open Market HomeBuy initiative from 1 April 2008.  Anyone who is in the application process, or existing customers, will still be able to continue with these products or switch to the new ones.   

Open Market HomeBuy is one of three HomeBuy products. Social HomeBuy enables tenants of local authorities and housing associations to buy a share in their current home at a discount. New Build HomeBuy will enable people to buy a share of a newly built property paying a rent on the remainder.  

The Government is committed to home ownership.  The Housing Green Paper outlines plans to build 70,000 more affordable homes each year by 2011, to include 25,000 new shared ownership and shared equity homes a year.  The Government is investing £8.4 billion in the Housing Corporation’s National Affordable Housing Programme for 2008-2011, to fund at least 155,000 new affordable homes in the next three years.  More than 50,000 of these will be for affordable sale through the government's HomeBuy initiatives.

These new HomeBuy products are part of a range of programmes to help people buy their first home. Policies introduced since 1997 have already helped more than 95,000 first time buyers and key workers get a foot on the housing ladder through shared ownership schemes, including Open Market HomeBuy.  

The following groups are eligible for Open Market HomeBuy:

• Social tenants and those on the housing register: tenants of councils and housing associations, and those who are on the housing register, waiting for a council or housing association home to rent. 
• Key workers: those working in the public sector in health, education or community safety - such as teachers, nurses and police officers - in areas where high house prices are affecting recruitment and retention. If participants leave qualifying employment, they will have to repay the Government’s assistance and remortgage to a standard mortgage.  
• Priority first time buyers: households who can't afford to buy their own home, who have been identified as eligible for assistance by the Regional Housing Boards.

The Housing Corporation is the Government's national affordable homes agency, responsible for investing in new affordable homes and regulating nearly 2,000 housing associations across England.

The Corporation's £8.4 billion investment programme for 2008-11 is its biggest ever. Its previous NAHP investment programme of £3.9 billion for 2006-08 is funding 84,000 homes; 49,000 of these are for affordable rent, and 35,000 are for affordable sale through the Government's HomeBuy initiatives, helping people to get a foot on the property ladder.

The Housing Corporation is working with English Partnerships and Communities and Local Government to establish the proposed Homes and Communities Agency and Office for Tenants and Social Landlords.