Last week’s budget contained good news for first time buyers as George Osborne announced an assisted deposit scheme to be funded with £250 million. The First Buy scheme will be open to those with a household income of less than £60,000 a year who can put down a 5% deposit on a new home.

However, analysts of the UK housing market have already suggested that the scheme is ‘window dressing the wider problem’ and will benefit the construction industry more than first-time buyers.Those who qualify will be eligible for a loan worth up to 20% of the value of the property, jointly funded by the government and housebuilders. The loan will be interest-free for five years and only be repayable when the house is sold.

Osborne intends the fund to help first-time buyers who are currently only able access mortgages requiring much bigger deposits, as lenders tightened their criteria in the wake of the credit crunch and recession.

Additionally, the government hopes the fund will result in the building of 10,000 new homes and protect 40,000 jobs in the construction industry.The first-time buyer pressure group ‘Priced Out’ said the fund could be dangerous for potential borrowers. When independent economists are predicting a 10% fall in house prices this year, having the government encouraging first-time buyers to get on to the ladder using a 5% deposit looks foolhardy at best and, at worst, pretty irresponsible.

The budget initiative is similar to the recent tie-up between 15 local authorities and Lloyds TSB to launch a fund to top up the deposits of local first-time buyers. The scheme, called Local Lend a Hand, allows first-timers to buy a home with a deposit of as little as 5%. But it will also only assist a small number of borrowers, while the local authorities have been criticised for using taxpayer money to encourage younger borrowers to take on debt at a time of uncertainty in the housing market.

Zoopla.co.uk has said recently that first-time buyers currently pay an average deposit of £25,000, which would plummet to an initial £6,250 for those taking part in the scheme. However, it is exclusively for new-build properties and only around 11,000 buyers will benefit which is only a fraction of the overall number of potential first-timers.

While the availability of credit is slowly easing, it’s not easing fast enough to help those borrowers who don’t qualify.The chief executive of Leeds building society has welcomed the support package for first-time buyers. Last week it announced that it will increase its mortgage lending by 40% this year to £1.4bn, a significant percentage of which will be to first-time buyers.The Leeds building society typical shared-ownership mortgages offer up to 95% of the borrowers’ share, so the deposit required is smaller than with a traditional mortgage; if a borrower is buying 50% of the property, they only need to find a 2.5% deposit.

Young people and their parents know from their own experience that the biggest barrier to homeownership can often be saving for a deposit, and this scheme is a positive step by the government. Additionally, the scheme will unlock the lower end of the property market and ultimately generate more transactions through the chain. Therefore, although it is a small step, it is most certainly in the right direction.

The UK housing market stayed stuck in a ‘rut’ in February as mortgage lending stayed at low levels. Gross mortgage lending during the month was £9.5bn, almost identical to January’s low level, the Council of Mortgage Lenders (CML) said.

The CML said that lending remained weak, partly because banks were restricted, but also because there was little appetite for new borrowing among people concerned about their jobs and the economy.

Total lending was marginally higher than the same month a year ago, when activity in the market was also sluggish. The CML said 2011 would be “challenging” for the housing market.

The normal pick-up in house purchases after the New Year break was weaker than a year ago, although sales to cash buyers have remained steady.

The figures suggest a shift from mortgage borrowing for new house purchases, to remortgaging. This could indicate that some people are locking themselves into new fixed-rate deals ahead of an anticipated rise in interest rates later in the year.

Meanwhile, a separate survey indicated the shortage of homes has caused a backlog of frustrated buyers, leading to rising rents for tenants. With the mortgage market even more sluggish since the start of 2011, this has increased even further and rents have risen correspondingly

Rents rose by 0.2% in February to £684 a month, following a dip in the cost to tenants in January, the research from LSL Property Services found. The trend of a rising number of tenants falling behind with their rental payments continued. The survey found that 12.6% of all UK rents were in arrears, compared with 11% in January.

Flat-sharing website Easyroommate said that the average flatsharing rent was £365 a month in March last year, but had now risen by 9.3% to £399 a month by this March.

The housing market is probably the area of the UK economy which will be most affected by instability over the course of this year. The many people currently deploying a ‘wait and see’ strategy will increase meaning that the big losers will be people forced onto the market for one reason or another.