First-time buyers to get 20 per cent deposit loans

Thu, 24 Mar 2011

First-time buyers may soon be able to get a loan to help raise a deposit on a new-build home, the Chancellor said in his Budget.

The government has designated £250 million from the Bank Levy to help 10,000 first-time buyers purchase a new-build flat or house. The scheme will offer interest-free loans to Brits with incomes of up to £60,000 who are struggling to raise a deposit on their first home.

Under the FirstBuy initiative, co-founded with the house-building industry, buyers must save a deposit worth 5 per cent of their property's value, with the government and housebuilders putting up 10 per cent each through an equity loan . This will allow people to qualify for 75 per cent loan-to-value mortgage . The loans will be interest-free for five years and will then be charged at a "below-market rate of interest", probably around 1.75 per cent in year six, and at inflation plus 1 per cent thereafter.

According to a report published by mortgage insurance experts Glenworth Financial in October 2010, the "deposit barrier" to home ownership is by far the most significant obstacle facing Brits seeking to become home owners.
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