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 wil 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.
For those wanting to buy a home, whether, old or new, but do not have enough for a deposit, the govenrment will make a who a mortgage guarantee.available to lenders. Mr Osborne explained: "Using the government’s balance sheet to back these higher loan to value mortgages will dramatically increase their availability. We’ve worked with some of the biggest mortgage lenders to get this right. And we’re offering guarantees sufficient to support £130 billion of mortgages."
The mortgage guarantee scheme will be available from start of 2014 and run for three years.
Industry reaction
Ian Fletcher, director of policy at the British Property Federation, said: "This is a strong package of help for housing. Annual transactions are half what they were and that has a knock on consequences for all those parts of the economy that rely on people moving. Helping people needing a deposit has for some time been cited as the missing piece of a coherent housing policy and both is therefore welcome."
Ben de Waal, head of residential at construction consultant Aecom, said: “The introduction of "Help to Buy" will provide interest free deposits potentially helping to fund 25,000-30,000 homes per annum over the next 3 years. This is great news for the volume housebuilders, will give confidence to the Registered Providers to use market sales to cross subsidise social housing and will realise the potential to own your own home to thousands of people who may otherwise have been excluded.
“The flip side is the implication that the private rental sector is unlikely to receive significant political support. Is the Government in danger of setting a dangerous precedent of subsidy to fund home ownership. This is not sustainable in the long run so we come back to the need for a more diversified housing supply that embraces renting as acceptable rather than simply for the "can't affords'. This budget has in many ways reinforced the negative stigma associated with renting at a time when the market for institutional grade, high quality service orientated housing is just beginning to take off. Poor timing.
“Disappointing that there was no mention of Local Authority debt caps being raised to help them fund new homes. Clearly the impact on the UK balance sheet is considered to be too great but it ignores that from a delivery point of view the Local Authorities are very well placed to fund a major programme of new housing on land already within their ownership.”
Linden Homes divisional managing director Tom Nicholson said: “We are looking forward to receiving the full details, however we are delighted to see yet another proactive initiative from the government. We have seen other schemes work successfully up and down the country, including First Buy and NewBuy. These revised plans now open up the options for even more people to get on the ladder, or make that all important next step up.
“This support from government will boost the national economy and the housebuilding industry, and help fulfil the demand for more housing in the UK. The revised income criteria will be well received by customers, who previously haven’t been eligible for the currently available schemes.
“We also interested to learn more about the new mortgage guarantee system scheduled for 2014, which will help families who have previously wanted to take out a mortgage on a home but need some extra support.
“We believe this announcement will bring another welcome boost to general confidence, and get the housing market moving consistently in the right direction.”
NHBC chief executive Mike Quinton said: "The Chancellor has today given a welcome shot in the arm for the UK's housebuilding industry. We warmly welcome the expansion of measures for people who want to buy their own homes. This will help boost the housing market and provide vital support for the construction industry.
"'Builders up and down the country have been working hard to build high quality homes while operating in tough economic times. Housebuilding fell 9% in 2012 compared to the previous year. It is therefore great news that housing has been the centre piece of this Budget. This is a positive step for homebuilders and homeowners alike."
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