Up the housing ladder - or down a hidden snake?

Up the housing ladder - or down a hidden snake?

This controversial plan, which aims to appeal to the large group of people who are currently priced out of the property market, aims to help 20,000 individuals a year for the next five years.

Despite the big headlines, the government's Homebuy programme isn't new - it has been up and running since 1999 and has so far helped around 10,000 people to buy a property.

In January deputy prime minister John Prescott announced he was broadening its scope, and challenged property developers to enter the arena and start building new homes aimed at those hoping to pay around £60,000 for their first house. He declared then that 80,000 buyers would be helped and pledged £600m to fund the plan.

Gordon Brown has simply announced a further expansion of this scheme, which for the first time will also be funded by the banks and building societies. The aim is get the total amount spent on the programme above £1bn.

So what is it and who is eligible? The Homebuy scheme is primarily aimed at those already renting from their local authority or who are living in some form of social housing - or are on a waiting to list to do so. There is also a slightly different scheme to those who are considered "key workers" - nurses,.....continued below

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Homebuy gives those on low incomes the chance to buy a proportion of their home - in most cases set at 75%. They take out a standard mortgage for their share and the agency administering the scheme on the government's behalf puts up the other 25% - usually on an interest-free basis. In future, the building society might put up the other 25%.

The buyer is responsible for maintenance and all other costs such as council tax, and in all other respects the house belongs to them. When it is sold, the sale price is split accordingly with each party banking their share of any profit.

Although final details of the new improved scheme are still to be published, it is possible that it will be widened to include all first-time buyers. The scheme will also include newly built homes, and is likely to feature a number of inner city regeneration projects.

One important area to be decided is how those most in need will be identified. It is almost certain that applicants will have to provide detailed evidence of income to make sure the homes are allocated to those who are considered to be on a low income.

However, the agencies handing over the government's money will also want to know that the person they are lending to will be able to keep up their mortgage repayments and meet the extra costs that accompanies home ownership. For this reason, those in rent arrears are unlikely to be accepted.

A spokeswoman for the Housing Corporation said there isn't an upper salary at which applications will be refused. "Each application will be judged on its merits - income will be judged alongside local house prices," she said.

But one of the problems of shared ownership schemes is that they can tempt those on low incomes to overstretch themselves financially. Social housing and local authority rents rarely climb steeply, but those buying a house soon find themselves at the mercy of interest rates.