First-time buyer wary of Budget housing loan scheme

For Luke Anstee, buying a first home would mean more than getting on the property ladder.

The 23-year-old hopes it would give him the chance to put down roots after spending much of his childhood moving around because of his father's Army career.

Further details of the government's proposed Your First Home scheme are expected in Wednesday's Budget, with ministers saying it could help first-time buyers purchase a property with a deposit as low as 2.5%.

Anstee said he had rarely lived in one place 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.

Having spent 10 years in Germany and moving around the UK, he said he was craving stability and the opportunity to buy a place of his own.

Despite saving money every month for the past three years, he believes home ownership is still some 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."

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

However, he said the cost of living makes it harder to save.

"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 confirm further details when Chancellor John Healey delivers his Budget on Wednesday.

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

The loans would be subject to an initial interest-free period and are intended to help people buy a home with deposits as low as 2.5%.

Households earning less than £110,000 would qualify, while the threshold would be £140,000 for homes bought in London.

The scheme is similar to previous programmes including Help to Buy, which also used equity loans to support home purchases.

Unveiling it at last month's Labour conference, Prime Minister Andy Burnham said it would focus on those who "really need support".

Previous schemes did not restrict eligibility by income, but faced criticism from some who argued they helped push up house prices by allowing wealthier households to borrow more.

Anstee said he would be hesitant to take on additional 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 difficult to know whether a scheme like this would succeed.

"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."

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