The Open Market HomeBuy scheme is set to be reviewed with borrowers able to take a mortgage of 50 per cent of the value. The current offering has reportedly only helped around 2,000 FTBs onto the housing ladder since its launch in October 2006.
The previous plan allowed the FTB to take a mortgage of 75 per cent of the property value with loans of 12.5 per cent each from the government and lender.
However, the revised proposition will see a consortium of housing associations allowing FTBs to take a mortgage of at least 50 per cent of the property value.
The change means that a buyer seeking to buy a property with a value of £300,000 would be able to take out a mortgage for £150,000 which may be deemed to be an acceptable level for a FTB.
The remaining finance would be covered by equity loans which the borrower would pay interest on from the first day, though this would be set at 1.75 per cent rising to RPI inflation plus 1 per cent.
A second option under discussion is an initiative run by housing and regeneration group Places for People in conjunction with the Co-operative Bank.
Customers will not have to pay interest on the loan for the first five years. After five years there is a fixed interest rate of 1.75 per cent and from year eleven the interest rises to a fixed rate of 3.75 per cent for the remainder of the period. The maximum loan is £165,000, and applicants must be on a joint income of £60,000 or less.
Neil Johnson, PR & policy manager at the Building Societies Association, said: “This is a step in the right direction but there are still a lot of barriers in the way and we have to recognise the problems that people face in getting on to the housing ladder.
"On the finance side, it is better but there are still bigger problems with the HomeBuy scheme in regards to distribution and agents, and which lenders will be offering the products.”
