The government will lend homebuyers up to a fifth of the value of their property in a bid to help people own their own home and will extend mortgage guarantees, as the chancellor unveiled the latest set of proposals to boost a stagnant housing market.
In today’s (20 March) Budget, chancellor George Osborne outlined a new ‘help to buy’ programme, which will extend support to existing homeowners as well as first-time buyers to buy new build properties.
The plan comprises two main thrusts: an equity loan for those that are struggling to afford high deposits and a programme of mortgage guarantee that he said will support “£113bn worth of mortgages”.
Under the equity loan, buyers of new-build homes with at least a 5 per cent deposit will have access to a government loan of up to 20 per cent of the value of the property through an equity loan, which can be repaid at any time or on the sale of the home.
This will apply to houses worth up to £600,000 and will mean potential buyers would only need to secure a 75 per cent mortgage from a bank or building society.
The mortgage guarantee covers new builds and existing homes worth up to £600,000. Under the terms of the scheme, first-time buyers or existing homeowners will need a similar 5 per cent deposit.
When the buyer secures a mortgage the government will guarantee part of the loan with the lender, a plan which aims to give people with smaller deposits access to lower loan-to-value mortgages.
Available from 1 April 2013, the scheme will run for three years and provide £3.5bn of additional investment.
The chancellor also used the budget to confirm he will look to extend the funding for lending scheme as he praised the catalysing effect it has had on mortgage lending, despite figures from the Bank of England showing lending dropped £2.4bn in 2012.
This is despite banks and building societies drawing down £14bn from the scheme.
