THE SCOTTISH Government yesterday ditched plans to give first-time buyers a £2000 grant, but announced a £25 million fund to bail out homeowners as the credit crunch bites, writes Steve Bargeton, political editor.

In their election manifesto the SNP promised to give a one-off payment of £2000 to first-time buyers to help get them on the property ladder. But over the last year ministers have refused to say how that pledge would be honoured.

And yesterday, in a statement to MSPs on housing, cabinet secretary Nicola Sturgeon subtly said it had been dropped.

“It is our judgment that, in the current market climate, this approach offers more effective help to first-time buyers than direct grants,” she said.

Labour said this meant the grant was now “officially dead.”

Ms Sturgeon announced the Government is setting aside a pot of money to help homeowners caught in the credit crunch.

“As a government, we recognise the significant effort and sacrifice that people have made to buy their own home,” she said.

“For this reason, over the coming months, I want to take some direct action. I can announce today that we intend to launch a homeowners’ support fund to help those who cannot obtain help from elsewhere remain in their own homes.

“Over the next two years we will make available £25 million to help homeowners facing repossession of their homes.”

The minister said the government is working with lenders and social landlords to extend the options available to homeowners facing repossession.

The only option currently available is the so-called “mortgage to rent.”

“We want specifically to include the option of shared equity and shared ownership, which would allow people to retain ownership of their homes instead of having to give up home ownership completely,” said Ms Sturgeon.

“These measures demonstrate that, for those who have struggled to buy their own home, we understand the sacrifice they have made and are targeting support wherever we can.”

Ms Sturgeon also said legislation would be introduced to make sure lenders notify local councils when they intend to repossess a property, saying this would “make sure people don’t slip through the net.”

Labour’s housing spokesman, Johann Lamont, said, “The £2000 grant for first-time buyers is now officially dead.

“Yet again the SNP have failed to deliver on a manifesto pledge that was either a cynical attempt to win votes or undeliverable.

“The First Minister’s repeated reassurances he would work his way through all the SNP manifesto pledges over four years have again been shown to be hollow.”

A Scottish Government spokesman said, “The Scottish Government has already helped over 1800 first-time buyers in its first year.

“It is our judgement that, in the current market climate, in which the availability of finance for mortgages is more constrained and buyers need increasingly large deposits, this approach offers more effective help to first-time buyers than a £2000 direct grant.

“This approach is also in keeping with the responses we received during the consultation on Firm Foundations which revealed the overwhelming majority of respondents felt resources would be better used elsewhere.”