First-time buyer wary of Budget housing loan scheme

First-time buyer cautious about Budget housing loan plan

Luke Anstee said years of moving around with his Army family left him wanting a place to call home

For Luke Anstee, purchasing his first home would mean more than simply stepping onto the property ladder.

The 23-year-old says it would give him the chance to settle down after spending much of his childhood moving from place to place because of his father's Army career.

More details of the government's proposed Your First Home scheme are due in Wednesday's Budget, with ministers saying it could help first-time buyers buy a property with a deposit of just 2.5%.

Anstee said he had seldom lived anywhere for long.

"I don't think I've ever stayed in one place for more than three years at a time, so it would be nice to actually have somewhere where I can stay," he said.

After spending 10 years in Germany and moving around the UK, he said he was looking for stability and the chance to buy a home of his own.

Although he has been putting money aside every month for the past three years, he believes owning a home is still a long way off.

"It is not where I would like it to be. When I can, I try and put more in, but one of the things I am mindful of is that I am in my final year of university," he said.

"I am over the threshold of when I have to start paying [my student loan] back."

Further details of the government's proposed Your First Home scheme are expected in Wednesday's Budget

Anstee earns more than £25,000 a year in IT and lives in a house share.

Even so, he said the cost of living makes saving harder.

"If you think about my weekly shop, back in the day that would probably be £20-30. Now it's £60," he said.

"I used to pay high 40s, low 50s [to fill up on petrol]. Now I pay nearly £70 a tank.

"You can cut back on subscriptions and stuff but I don't pay for any."

The government announced the Your First Home scheme in September and is expected to set out more details when Chancellor John Healey presents his Budget on Wednesday.

Under the plans, eligible first-time buyers in England would be able to use a government-backed equity loan worth 20% of the value of a new-build home.

The loans would come with an initial interest-free period and are designed to help people buy with deposits as low as 2.5%.

Households earning under £110,000 would be eligible, while the limit would be £140,000 for homes purchased in London.

The scheme is similar to earlier programmes such as Help to Buy, which also used equity loans to support home purchases.

Launching it at last month's Labour conference, Prime Minister Andy Burnham said it would target people who "really need support".

Earlier schemes did not cap eligibility by income, but were criticised by some who said they helped drive up house prices by enabling wealthier households to borrow more.

Julia Weston said higher interest rates could make shared-equity style schemes more costly over time

Anstee said he would be reluctant to take on extra borrowing.

"I don't want to add more loans," he said.

"That is still a loan. [The government] do not specify how long it's interest-free for.

"You may save that initially, but once that interest starts kicking in on that loan, it could come back to kick you in the backside.

"I think it would help people get onto the property ladder but, in the long run, it is not a good idea.

"It feels like a bit of a gamble because you are relying on interest rates in the future to be stable."

Julia Weston, from Wellington, has worked as an estate agent for more than 30 years.

She said it was hard to know whether a scheme like this would work.

"If you were to take out what is effectively a shared equity loan like Help to Buy was and then interest rates go up, you have got to fold in a massive chunk of money at your five-year mortgage renewal at a higher interest rate," she said.

"What if you lose your job, what if you have an unexpected baby or you lose one of your wage incomes?

"You are not just getting that share - you've got to remember that on the share that you rent from whatever organisation it is."