Affordability remains a major headache for public sector workers

The Open Market HomeBuy Scheme will see the government and selected lenders funding up to 25% of a property cost.

Interest payment start after five years but it should help borrowers afford more expensive property.

Borrowers will still have to fund the remaining 75% of the property cost through a standard mortgage or their own savings.

Scheme acceptance

We want to help more families get a first step on to the housing ladder Yvette Cooper, housing minister

The scheme will be open to public sector workers and those on council housing waiting lists.

Applicants will be assessed by HomeBuy agents, employed by local housing associations.

Once the applicant has been accepted onto the scheme they will have 12.5% of the property value loaned to them by the government and 12.5% by a lender, drawn from selected banks and building societies.

This 25% loan will be interest free for the first five years but if the property is sold the government and lender will be entitled to a share in any increase in its value.

The government said that its portion of the loan will be interest free indefinitely.

The 25% loan will help the borrower afford a more expensive home than would have been the case if they had had to rely on just a mortgage and their own savings as a deposit.

The concept is excellent but the scale and eligibility (of the scheme) falls short of widespread expectations and hopes Helen Adams, FirstRungNow.com

The government cited the example of a public sector worker earning �35,000 a year.

The worker would be typically entitled to a mortgage of �122,500, with the 25% HomeBuy scheme loan on top they could afford a property worth �160,000.

"We want to help more families get a first step on to the housing ladder," Yvette Cooper, housing minister said.

"In the long run we need to build more homes to ease the pressure on house prices.

"But in the meantime this new mortgage deal will help thousands of families into a home of their own," Ms Cooper added.

Surface scratched

To date four lenders have signed up for the scheme - Nationwide, Bank of Scotland, Morgan Stanley Advantage, and the Yorkshire Building Society.

The scheme, though, has been criticised as only scratching the surface of the problem of property affordability.

"The concept is excellent but the scale and eligibility (of the scheme) falls short of widespread expectations and hopes," Helen Adams, managing director of property website FirstRungNow.com, told BBC News.

"Today's first time buyers, unless they can be described as a key worker will still need to look for a solution amongst the array of new property and mortgage 'deals' being offered or go cap in hand to their parents," she added.

Housing target

The Open Market HomeBuy scheme will run alongside the already existing HomeBuy scheme.

Broadly, the existing HomeBuy scheme helps key workers buy up to 75% of the value of a property, with a registered social landlord or property developer owning the remaining stake to whom they pay rent.

Since HomeBuy started in 1999, 40,000 people have been helped to buy part of their own property with the government targeting another 100,000 for help by 2010.

But in July a report from the National Audit Office (NAO) said the government needs to improve the efficiency of its shared ownership home buying schemes.

Only 11,000 households were helped by the HomeBuy schemes in 2004-05 even though 60,000 applied.