A new shared equity mortgage to help an extra 20,000 people buy their own home is being launched today by Housing Minister Yvette Cooper.

The Government has teamed up with four private sector lenders, Nationwide, Yorkshire Building Society, Advantage - a Morgan Stanley company, and Bank of Scotland, to offer a mortgage that will boost people's buying power by up to 25 per cent.

Currently, a family on a combined income of £35,000 could typically obtain a mortgage of just £122,500. But if eligible for Open Market HomeBuy, they could potentially buy a home worth over £160,000.

Although mortgage rates are still low, rising house prices have put pressure on first time buyers. Almost half of home buyers in their twenties now rely on help from family or friends to get started.

Yvette Cooper said:

"We want to help more families get a first step on to the housing ladder. If you haven't got family or friends who can help it can be hard to get started. In the long run we need to build more homes to ease the pressure on house prices. But in the meantime this new mortgage deal will help thousands of families into a home of their own."

Open Market HomeBuy will allow house hunters to apply for a regular mortgage topped up with equity loans, funded by Government and one of the four lenders.

No deposit is required and monthly repayments will start at around 20 per cent less than buying without assistance, because lenders and Government would expect to benefit from any increase in the value of their equity share in the property.

The scheme 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.

In order to qualify, an applicant would need to be able to fund 75 per cent of their purchase with a mortgage offered by one of the four lenders. This will be topped up with two equity loans each worth 12.5 per cent of the purchase price from the Government and the lender.

The scheme allows the buyer to choose any property on the open market within their price range. There are no charges on the lender's equity loan for the first 5 years, and no charge will ever be placed on the Government's equity loan. In return both the lender and the Government will be entitled to a share of any increase in the value of the property when the home is sold and the equity loan repaid.

The new HomeBuy mortgage is part of a wave of new programmes to help first time buyers get a foot on the housing ladder. Policies introduced since 1999 have already helped more than 40,000 people buy their own homes through shared equity schemes and shared ownership. But the government is committed to going further. Ministers have already promised to help more than 100,000 families into home ownership by 2010.

In addition to the new HomeBuy mortgage launched today, qualifying households have the option to buy a shared ownership home through New Build HomeBuy, or buy their social rented home through Social HomeBuy. The Government is investing £970 million in the Housing Corporation’s Affordable Housing programme for 35,000 low cost home ownership properties. English Partnerships is also offering equity loans on homes on public sector land. In addition, the Shared Equity Task Force will report by the end of the year on ways to further increase the number of households able to benefit from shared equity schemes.

Notes to editors
1. 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. A list of the HomeBuy Agents and their contact details are available on DCLG’s website at: www.communities.gov.uk/pub/629/HomeBuyAgentsContactsList_id1164629.pdf

2. Press contact details for the 4 private sector lenders are:

Nationwide - 01793 655189
Yorkshire Building Society - 01274 472589
Bank of Scotland - 01422 391249
Advantage - 0845 8030 333

3. From today, buyers who qualify for Open Market Homebuy will be able to apply for a shared equity mortgage from Advantage, Yorkshire Building Society and Nationwide, with Bank of Scotland’s available later this year.

4. 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 (this includes the First Time Buyers Initiative which uses public sector land).

5. Extra information about Open Market HomeBuy be found from; a leaflet produced by the Housing Corporation http://www.search4myplace.co.uk/Data/Pub/StreamTemp/radD5799.pdf; and a leaflet produced by the FSA http://www.fsa.gov.uk/consumer/pdfs/open_market_homebuy.pdf

6. 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.

Media Enquiries: 020 7944 8915
Out of Hours: 020 7944 5945
E-mail: press.office@communities.gsi.gov.uk
Public Enquiries: 020 7944 4400
DCLG website: www.communities.gov.uk

The Department for Communities and Local Government is not responsible for the contents or reliability of the linked web sites and does not necessarily endorse the views expressed within them. Listing should not be taken as endorsement of any kind. We cannot guarantee that these links will work all of the time and we have no control over the availability of the linked pages.