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While the FTSE 100 fell 0.04% in the immediate aftermath of the George Osborne’s 2013 budget, suggesting no great surprises within it, there was a buying spree for the bricks and mortar firms.
Barratt’s share price rose 9% from 239 to 262 and Persimmon was up 8% from 970 to 1048. Other major housebuilders also rose strongly in the hour after the Chancellor sat down. Crest Nicholson rose 5.5%, Redrow and Bellway were both up 4.3% and Bovis Homes went up 3%. Berkeley Group went from 2045 to 2104 and Taylor Wimpey from 85 to 89.
The City was evidently responding to the governent's 'help to buy' intervention to give all buyers of newly-built homes a five-year interest free loan worth 20% of the value of the property they want to buy.
Mr Osborne called the scheme 'a dramatic intervention' to help housebuilders. By extending the scheme beyond first-time buyers to all home buyers, it will also help home owners move up the housing ladder, he said.
House buyers are required to put down a 5% deposit. The offer applies only to newly-built homes and only to those below £600,000 in value, which the vast majority of new-build houses are. Loans are interest-free for five years and only available on capital repayment mortgages. After five years the lending rate will be set by the mortgage lender, not the government.
Help to Buy is made up of two schemes – “equity loan” where the government will loan you up to 20% of the value of your new build home and “mortgage guarantee” where lenders will be incentivised to make more mortgages available for people with small deposits.
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