The agreement allows the lenders to go ahead with private financing of equity loans to strengthen a new range of HomeBuy schemes which will contribute towards helping an additional 20,000 households into home ownership by 2010, bringing the total to over 100,000.
The new offer, agreed with Yorkshire Building Society, Nationwide Building Society and HBOS, will be available from October 2006 on a pilot basis for two years. Detailed discussions on implementing the equity loans are continuing with the Council of Mortgage Lenders (CML), the FSA and the three lenders involved.
The loans will be based on the Government's new Open Market HomeBuy product, helping people to buy a home on the open market with an equity loan. They draw on best practice from the current successful open market product, principally through the Key Worker Living scheme.
Lenders will provide a ‘top-up’ equity loan along with the buyer’s mortgage, for example, a 75 per cent mortgage with a 12.5 per cent equity loan, with the remaining 12.5 per cent being provided by the Government.
Buyers will be able to choose the best offer for them - ensuring choice and competition - whilst pricing and affordability levels will be in line with current low cost home ownership products.
Iain Cornish, chief executive of Yorkshire Building Society, said, "As a mutual building society one of our primary objectives is helping people to buy their own homes. This scheme aimed at first time buyers and key workers will help tackle a major obstacle to them fulfilling their dreams."
Nationwide's executive director, Stuart Bernau, said: "We're pleased to be involved with this scheme to bring 20,000 more first time buyers into home ownership. It is a natural step for Nationwide as we have the largest commitment of any lender to the affordable housing sector in the UK. It's in everyone's interest that first time buyers are able to get a foot on the housing ladder and we are keen to play our part."
Stephen Sandiford, head of specialist lending strategy at HBOS, said: "This scheme will be welcome news for those First Time Buyers who need help getting onto the housing ladder."
