London, United Kingdom -- (SBWIRE) -- 04/08/2011 -- A shared equity scheme worth £250 million was unveiled by Chancellor George Osborne in his 2011 Budget speech, restricted to first time buyers and newly built properties.

On the face of it, this could assist many British would-be buyers who lack the £30,000 or more deposit needed to get onto the property ladder, and have found banks reluctant to lend to them. It may also provide some support to the house-building industry which is still suffering more than two years after the credit crisis of autumn 2008 caused the property market to slow.

But what are the chances of the measure having any significant or lasting effect? There has been a succession of similar schemes over the past decade, each targeted at roughly similar areas of the market. HomeBuy Direct is the main one, although others have come and gone.

The fact that so many have indeed ‘gone’ is a clue that these type of incentive schemes may not have much impact. Take up can be patchy, partly because there are worrying downsides to the deal. If you cannot afford a regular mortgage, can you really afford one that is shared equity?

Typically, shared equity buyers get a proportion of their home as a loan from a third party (often the developer), which acts as a deposit for a bank. But they have to repay this loan within ten years or when the property is sold, whichever is the sooner.

Many buyers have found that they are not in a position to repay the loan in ten years and forfeit the property, which has given shared-equity schemes a bad name.

No doubt the government will claim that things are different this time around. But with unemployment rising, interest rates likely to rise later this year and the economy stagnating, it would be an optimistic buyer who could say they’ll raise the cash to pay back 25 per cent of the cost of their property within ten years.

Original comment can be found at the mortgage advisory