First time buyers who have seen their hopes of being able to buy a new home sunk by the credit crunch will be helped by initiatives from builders this year; it has been revealed.
The prediction came from Bovis Homes chief David Ritchie, who said his company – and others – is exploring various schemes to assist first time buyers in an “unprecedentedly difficult” housing market.
Ritchie’s comments followed news that Barratt Developments is teaming up with finance house Hitachi Capital to launch a £1 billion fund to offer loans up to £50,000 to the parents of first time buyers. The loans will be repaid over 12 years at a fixed-rate of 5.4 per cent, with no early repayment charges. With the average Barratt new home costing £192,000, the scheme means a first time buyer needs a deposit of only £9,600 – and wealthy parents – to buy their own place.
On some Home Counties sites, David Wilson Homes, part of Barratt, offers to pay five per cent interest for five years on deposits up to 20 per cent. Parents putting down £48,000 of savings could get a £12,000 payback when their child buys a home. Taylor Wimpey is also expected to unveil plans to assist first time buyers. Ritchie said Bovis also looked at the “interesting idea” from Hitachi Capital – which lends to more than half a million consumers and works with around 5,500 companies.
He says: “But our experience is that if parents have enough wealth to consider the Hitachi scheme, they may make a gift to their son or daughter to enable them to become buyers.”
In any case, Bovis launched its own plan to help first time buyers last summer: Perfect 10 provides 90 per cent mortgages through the Woolwich arm of Barclays Bank, which are fixed at 4.99 per cent for two years.
In each purchase, Bovis gives the bank a mortgage indemnity to cover losses which the bank might incur if any purchase under the scheme collapsed and the home had to be resold.
Although the scheme took a year to arrange, during which time the bank was persuaded that its own money would never be at risk, Ritchie says it is having “less of an impact on our business than we hoped.
“We hoped the final quarter of last year would see a stream of purchasers choosing Perfect 10, but the fact is that not many would-be purchasers are managing to amass the 10 per cent deposit.”
Bristol Evening Post: 28.01.11