This statement sets out the steps we are taking to provide more opportunities for first-time buyers to access the housing market.
The vast majority of people in this country aspire to owning their own home. People value the security of homeownership, the sense of having a stake in the community, and the chance to build up assets.
Rising prosperity in this country over recent years, with high employment and low interest rates, has meant that more people have been able to aspire to homeownership. Since 1997, there are 1 million more households who own their own home. One hundred and ten thousand have benefited from our low cost home ownership programmes, enabling them to get a first foot on the property ladder.
However, a fundamental mismatch between supply and demand has now put house prices far beyond the reach of many, particularly first-time buyers. Ten years ago, the average house price was just 3.5 times the average income. Now, the average house costs more than seven times the average income. And while interest rates have fallen, the result is still that fewer first-time buyers are able to enter the market. Not only is this a potential brake on aspiration and social mobility, it may also cause stagnation in the rest of the market.
The long-term solution is to build more homes to overcome this housing shortage. This is why we are embarking on a major housing supply programme under which we want to see outputs rising to 240,000 new homes a year by 2016. But in the short-term, we want to do more to ensure that more potential first-time buyers are able to enter the property market.
The current market situation makes this more difficult. Last week we announced a package of measures to help support home owners, including measures to ensure that financial advice and support is available for borrowers who may be facing difficulties with their mortgage.
But we also want to see mortgages available for those who can sustain home ownership, and at the same time we want to support housebuilding.
Through our shared equity schemes, we already aim to help 75,000 more householders on to the property ladder over the next three years. Today I am announcing how we can go even further than that by focusing spending to support the housing market and those looking to get on the housing ladder. In the Budget the Government announced two new open market homebuy products offering greater affordability to first-time buyers. We have also announced a purchase assistance grant of £1,500 to the first 2,000 purchasers to help them with the costs of moving into a new home.
Today I am announcing an expansion of the eligibility criteria for these products so that more people can benefit. It is right that we continue to give priority to key workers and tenants in the social rented sector. But from today both the new build homebuy and open market homebuy products will also be open to all first-time buyers with a household income below £60,000 who could not otherwise afford to buy. This will allow, for instance those who work in public services but who are employed by the private sector, to access this support.
In addition we are focusing up to £100 million spending to expand open market homebuy to help an additional 2,500 first-time buyers purchase a newly built home in 2008-09. Purchasers will be able to apply to use the new shared equity products announced on the 1 of April to purchase a new-build home of their choice on the open market. The new products help to improve affordability to buyers by offering an equity loan of up to 50 per cent. of property value. This scheme will make a wide choice of new property open to prospective buyers while also helping to support the new build market and maintain housing supply.
This change will more than double the number of families helped by the new open market homebuy products this year.
Alongside this, we are maintaining our commitment to deliver much needed social rented homes, keeping up delivery in 2008-09 and with a target of 45,000 such homes in 2010-11.
The current market also provides opportunities for housing associations to buy new properties from housebuilders at competitive prices. The Housing Corporation has already been working with housing associations and housebuilders to take advantage of these opportunities. In the first three months of the year, housing associations bought 1,800 homes from developers through the national affordable housing programme. Nearly 840 of these were for low cost home ownership and 935 were for social rent.
I have today asked the Housing Corporation to use flexibilities available to them in their current programme to fund more such purchases where they represent good value for money. The corporation estimates that it may be able to fund an additional £200 million of direct purchases from housebuilders in the current financial year, helping yet more families into low cost home ownership and rented accommodation.
A marketing campaign for all the homebuy products will be launched in partnership with lenders and housing associations in order to raise awareness of the new criteria. Government will work with the TUC and individual trade unions to promote these opportunities to their members.
Following Government’s meeting with the Council of Mortgage Lenders and lenders, we will continue to work with a range of lenders to support a fair and well functioning UK mortgage market. We will also work with lenders to encourage them to develop their own shared equity products.