“Cash runs out for first-time buyers”, declared a recent Daily Mail headline. Desperate to be seen to be helping homebuyers and homeowners, the government has launched a raft of schemes. But do any of them work?
The Daily Mail’s target was the MyChoice HomeBuy scheme. This has been popular because it helps first-time buyers chase any property, not just the new homes targeted by similar “key worker” schemes. The buyer must fund at least half the purchase price via a traditional mortgage, with the rest coming from a low-cost housing association loan. But the scheme has already chewed up all the initial £125m set aside for it, so many buyers are stumping up non-refundable legal and survey fees only to find out later that they won’t get any government help.
But it’s not the only scheme to disappoint the tabloids. Take the £200m Mortgage Rescue Scheme, which so far “helps just one family”, complains the Daily Express. This was supposed to help 6,000 vulnerable families avoid losing their homes, by letting them sell part or all of their property to a housing association, but continue to live in it. Yet of 452 households to apply in the first quarter, only one has seen the money. There’s also a separate Repossessions Prevention Fund that offers loans of up to £5,000 – but that has only £20m available, suggesting just 4,000 households can benefit.
Next, there’s the Homeowners Mortgage Support Scheme. This aims to help a borrower whose income has dropped temporarily defer up to 70% of their mortgage interest for up to two years. But once again, applicants have been struggling to get help. Six million customers with lenders that haven’t joined the scheme are ineligible, says The Times. Those banks that have joined won’t grant deferrals if income has been lost due to circumstances such as long-term illness.
Finally, how about the Income Support for Mortgage Interest Scheme? This refunds your interest at a fixed rate of 6.08%. Sounds great, but you must be on means-tested benefits, such as jobseekers allowance or pension credits. You have to wait 13 weeks after losing a job to start receiving support. And the maximum loan on which interest can be refunded is £200,000. In short, most of these schemes over-promise and under-deliver.