The scheme is designed to help public sector key workers and other eligible individuals to buy a home in the area where they work and which they may not previously have been able to afford.
The scheme will help an approved applicant to buy a house of their choice with the help of an equity loan. The Yorkshire Building Society scheme will offer a conventional mortgage of 75 per cent to which is added a 12.5 per cent charge free equity loan from the society, and a further 12.5 per cent charge free equity loan from the government. This allows the property to be purchased with a mortgage that charges interest on only 75 per cent of the property value.
The 75 per cent conventional loan is a tracker mortgage set at Bank of England (BoE) Base Rate plus 1 per cent for the first five years, then BoE Base Rate plus 1.25 per cent for the remaining term of the loan. It is on a capital and interest basis. The 12.5 per cent equity loan provided by the Yorkshire is charge free for the first five years, then 3 per cent fixed interest will be charged for the remaining term of the loan. The equity loan is interest only. The 12.5 per cent loan provided by the government is charge free for the full term of the mortgage. When the house is sold both the Yorkshire and the government are entitled to a 12.5 per cent share of the increase in the value of the property.
Andy Caton, corporate development director at Yorkshire Building Society said: “We are delighted to be participating in this government initiative which is designed to help key workers in areas where house prices have spiralled out of the reach of many people. We believe that one of our primary objectives as a mutual organisation is to help people buy to their own homes. Whilst the trial of the new Open Market HomeBuy scheme is not designed to provide a solution to all the problems that first-time buyers have in today’s market, it will give help to some of those who need it most. It will also give a lead to those lenders like ourselves who want to continue to develop innovative solutions to meet our members’ needs.”
