The United Bermuda Party yesterday unveiled plans to allow first-time buyers to purchase new two-bedroom homes with mortgages of less than $2,000 per month.

The Island's three major banks would offer mortgages at four percent for five years - three percent below the market rate - with Government providing guarantees on the loans to reduce risk, the UBP said.

And Government will give duty relief on materials to private companies building the houses, meaning a two bedroom home can be built for $250,000.

UBP Leader Grant Gibbons said yesterday the scheme would allow many Bermudians currently priced out the market the chance to finally realise their dream of owning a home.

The Island's major banks issued vague statements supporting affordable housing without confirming the details of the UBP's plan, but it is understood they will back the scheme.

Dr. Gibbons said the banks would not give firm commitments until all details were thrashed out, but based on his discussions, he was confident the banks agreed the scheme was workable and would support it.

Dr. Gibbons said yesterday: "A stable housing market that provides incentives to home ownership produces long-term social and economic benefits, including better financial stability and stronger, more cohesive communities.

"We've lacked such a system for too many years and with this plan, we'll finally have it."

Dr. Gibbons said around 600 homes a year were built in the mid-80s and early-90s compared to around 250 a year now.

With the new First Homes scheme unveiled yesterday, he saw no reason why the building numbers of the 1980s and 1990s could not be repeated, giving lower income Bermudians the chance to own a piece of the rock.

The announcement comes on top of the UBP's earlier pledge to build 100 homes within the first year of winning power to be rented to ease the housing crisis.

Under the First Homes plan, monthly mortgage payments for the first five years would be $1,914.95 per month.

The cost to build would be $250,000 but the total price would rise to $350,000 when land tax, legal fees, maintenance and insurance were included. So first time buyers would need a five percent deposit of $17,500.

Dr. Gibbons said with the average home on the Island now costing $1 million, Bermudians would need an annual income of $144,000 to afford the average home.

"With average monthly payments of approximately $6,000 and an average monthly income of under $3,600, most Bermudians simply can't afford it," he said.

He had talked to Bank of Bermuda, Bank of Butterfield, and his family's bank Capital G, and they were enthusiastic, he said.

He said the scheme would probably be limited to people who had a household income of up to $90,000 or $100,000 and they would have to be first time buyers.

When asked why banks would offer interest rates lower than the market rate, Dr. Gibbons said: "There is a fair amount of liquidity that needs to be invested because they want more money in the mortgage area and they understand the importance of social stability in the community."

Under the scheme, Government would guarantee against mortgage defaults, with the banks taking a smaller share of risk.

When asked by The Royal Gazette last night if the banks had definitely committed to this, Dr Gibbons said: "I've had discussions with all three banks and no bank is going to commit to specifics until final details are worked out.

"Interest rates are prone to change and they are looking at current market rates for five year terms, and my sense is what we are talking about is do-able.

"I've been very pleased with the reception I've got and they seem to be very enthusiastic for it to work.

"The final details depend upon the final structure and details to be put in place. But the sense I get is the interest rates we've talked about are do-able, and subject to the full package being worked out and final structures chosen (they will agree)."

A Bank of Butterfield spokeswoman said: "We believe housing is an important issue for our community and as a major financial institution it is our role to be part of a solution.

"We are committed to working with the Government and Bermuda's other banks to find a method by which home ownership can be affordable and obtainable for more Bermudians."

A Bank of Bermuda spokesman said: "The bank can confirm that it has had discussions about the critical issue of housing.

"A number of viable structures have been considered in outline terms. Clearly, affordable housing is one of the key social issues facing our island and we are very keen to work with the Government of the day to find solutions."

The UBP said it had identified Government sites - including Tudor Hill in Southampton - as well as private land across the Island to build the home.

And the party pledged that within one year of a Bermudian selecting a First Homes package, work will begin on the house.

Shadow Tourism Minister David Dodwell said: "Our opponents in the PLP have said that they built a foundation. Well the new United Bermuda Party is prepared to build the whole house.

"Our engineers and architects have developed a plan that will allow us to build homes at less than $250 per square foot.

"Working with surveyors, we've located several sites around the Island where land can be purchased at market rates."