The Scottish Government has closed applications for a fund aimed at helping first time buyers get onto the property ladder, after being live for only five working days.
Property portal ESPC responded by calling for “lessons to be learned” to avoid future issues and more criteria on the scheme to avoid people using it to get a “leg up”, ensuring the “most deserving” receive money.
The First Home Fund was designed to lend people up to £25,000 towards a deposit on their first home.
It launched on 1 April and closed on Thursday afternoon, after being inundated with applications. The government confirmed that applications for this year are “fully committed”.
Housing Minister Kevin Stewart stated in February that he expected it to help more than 2,500 people.
It is estimated the scheme would have allocated the top level of funding to these households but, if the scheme supported 8,000 households, the government would have paid £7,500 towards the deposit.
The budget for the fund was slashed from £200m last year to £60m, with Scottish ministers blaming a 66.5% cut in the Financial Transactions from the Treasury of £412m.
Annual house purchase loans have increased by 58% since 2011, reaching 70,000 by 2017, with the biggest increase (110%) for first time buyers from 17,000 to 35,000 – according to a Scottish Government paper in 2018 on the property market.
Paul Hilton, chief executive at ESPC, said: “We did expect it to run a little a longer, into May or possibly June.
“They [the government] will have to look at other alternatives like the 95% mortgage guarantee scheme, as there has been pent up demand for properties – I think that most have taken the £25,000 up to 49% of the property value, which just feels wrong.”
He argued that the government should review the policy and means test it to ensure the money lasts longer and helps more people out.
A mortgage advisor for ESPC said: “Different mortgage providers approached it differently, I think some of them had the deal agreed on principle and the applications were ready to go for the first of April, so when it opened there was an avalanche of applications.
“I think most people would have taken the full £25,000 tranche to help them get a bigger property or to avoid using their own funds – I think it has been used to help people get a leg up, which the scheme never supposed to do.
“There needs to be rules applied so companies aren’t allowed to be waiting like a stack of cars, perhaps a seal on the purchase price and levels of income.”
Nicola Barclay, chief executive of industry body Homes for Scotland, said: “This will clearly be very disappointing news to all those people who had been hoping that the fund would enable them to get onto the property ladder.
“We anticipated that there would be huge demand given the success of the pilot scheme run last year, but despite this, the Scottish Government allocated just 30% of the levels spent in 2020, citing budget cuts from Westminster for the reduction.”
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