Among the measures introduced, the Government will suspend stamp duty for a year on houses costing less than £175,000 in an attempt to show that it is on the side of property buyers at a time when sales have stagnated and values have slumped.
According to Halifax, house prices have fallen by an average of 10.9% over the past year - the fastest rate of decline since 1990 - and Bank of England figures revealed that mortgage approvals fell by 71% in the year to July, down to 33,000 - the lowest level since records began in 1993.
But is the Government's intervention enough to boost the market or do prices have further to fall before shoots of recovery appear?
What exactly has been announced?
Stamp duty: After much speculation, the Government has announced a 12-month stamp duty holiday for first time buyers purchasing properties costing less than £175,000. Normally 1% stamp duty is payable on properties between £125,000 and £250,000. Stamp duty rises to 3% on properties above £250,000 and 4% on those worth more than £500,000.
The decision to suspend stamp duty below £175,000 is designed to encourage more first time buyers to transact. An absence of first time buyers is exacerbating the property slowdown, because if new home owners aren't getting on to the ladder the rest of the market grinds to a halt. However, many analysts question whether or not a potential saving of £1,750 will be enough to entice first time buyers back to the market.
Many will still be nervous about buying now in case prices continue to fall and they find themselves in negative equity in a year or two's time - this is where the property is worth less than the outstanding mortgage against it. The other big issue faced by first time buyers is the problem of getting a mortgage. Whereas 12 months ago many lenders were happy to lend up to 95% of the property's value and some would even lend the entire amount - meaning you didn't need a deposit to get on the housing ladder - that is no longer the case. Very few mortgages are currently available above 90% and many of the best rates require deposits of 25% or more.
Consequently, the suspension of stamp duty may not be enough for many would-be first time buyers so the impact on the housing market is likely to be muted.
Interest-free loans: As well as the stamp duty holiday, the Government also announced plans to offer five-year interest-free loans to first time buyers of up to 30% of a property's value. On the face of it the shared equity initiative, to be known as Homebuy Direct, sounds great as it will help overcome the problem of first time buyers struggling to get a mortgage because of a lack of deposit. However, once you dig deeper there are question marks over just how much of an impact it will have.
The loans will only be available to households earning less than £60,000 a year, which in itself isn't necessarily a problem. Perhaps the biggest drawback is that the loans will only be available for new-build properties and it is not yet clear whether all new builds will be included or only certain properties chosen by developers.
Clearly, housebuilders are struggling to sell new build properties at the moment, but restricting these loans to new builds alone will do little to help stimulate the rest of the market because they are not occupied and there is therefore no ongoing chain: those struggling to move because they cannot find a buyer at the bottom of the ladder will not be helped by this initiative.
Mortgage rescue scheme: In addition, the Government introduced a £600m mortgage rescue scheme aimed at helping those on the verge of having their house repossessed.
Struggling homeowners will have a number of options: they will be able to sell a proportion of their home to a registered social landlord, such as a housing association. Known as shared ownership, this means your mortgage payments will be lower because you no longer own the entire property. However, when you come to sell, the housing association will receive some of the proceeds of the sale.
Another option will be for a social landlord to provide the homeowner with an equity loan, which is another way of reducing mortgage costs for hard-pressed borrowers.
And finally, those preferring to bale out of home ownership completely can choose to sell their property in its entirety to a housing association. You will then be classed as a social tenant and pay rent rather than a mortgage.
The Government is also making Income Support for mortgage interest more easily obtainable. From next April, the period before Income Support is paid will be cut from 39 weeks to 13.
What if the new Government initiatives aren't applicable to me?
The new plans are designed to help those who are at risk of repossession or are struggling to get on to the housing ladder. The majority of homeowners will be unaffected by them.
However, for those needing a mortgage, there has been some welcome news in recent weeks. After the mortgage drought of a few months ago, competitive home loans are reappearing again.
Leading mortgage rates
Yorkshire Building Society is the latest lender to cut its rates. It has the market-leading two-year fix at 4.89%. However, the fee is high - borrowers must pay a 2.25% arrangement fee and 0.25% booking fee. Yorkshire has also launched another two-year fix at 5.29%, which has a flat fee of £975. This may work out better value - it will depend on the size of your mortgage. Both deals are available for loans up to 75% of the property's value.
Britannia building society is also offering a competitive two-year fix at 5.44%. The set up costs are similar at £999, and this deal is also available for loans up to 75%.
These products highlight the current nature of the market - although many mortgage rates are coming down, lenders are still very nervous about who they will lend to. Consequently, the lowest rates tend only to be available to those with large deposits.
If you are looking to borrow 90% of the property's value, the leading two-year fix is from Skipton building society at 5.99%. The set up costs for this product are £1,090.
For those preferring longer-term security, Yorkshire Building Society has the leading five-year fix at 5.49%. Available for loans up to 75%, the arrangement fee is £975.
However, while many borrowers like the security of a fixed rate, some are prepared to take a bit of a gamble. And with some economists forecasting interest rate cuts before the end of the year, you may decide it's a good time to opt for a variable rate mortgage as your payments will then reduce if Bank rate does come down.
HSBC has a two-year discount at 5.49% with a £999 arrangement fee that is available for loans up to 90% of a property's value. One thing to bear in mind with discounts is that they are not linked directly to Bank rate, so any change in rate is at the lender's discretion. Most lenders do pass on interest rate reductions and increases in full, but there is no guarantee.
If you want the assurance that you will definitely benefit fully from any rate reductions, go for a tracker.
Principality has a tracker that is 0.49 points above Bank rate until the end of September 2010, meaning the current pay rate is 5.49%. There is a £999 arrangement fee but it is only available for those with a deposit of at least 40%.
Another option is a lifetime tracker and these are looking very good value as the best rates aren't much higher than those on shorter term products. By paying slightly more, you remove the need to remortgage every few years.
Woolwich is offering the lowest rate. It has a lifetime tracker that is 0.69 points above Bank rate, giving a current pay rate of 5.69%. There is a £995 arrangement fee and the product is available for loans up to 60% of a property's value. If you need to borrow more than that, HSBC's lifetime tracker at 5.79% is available for loans up to 90%. The fee on this deal is £599.
Have your say: What are your views on the Government's new initiatives aimed at helping first time buyers - will they help the housing market or is it too little, too late? Visit our forum and let us know.
Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.
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