21 March 2013, In a bid to invigorate the economy, the Chancellor has announced two new measures aimed at encouraging all aspiring and current homeowners to realise their first or next step on the property ladder.
In yesterday’s Budget, George Osborne revealed - what he claims to be a UK first – a mortgage guarantee scheme to support £130 billion worth of mortgages for a three year period from 1 January 2014 for those unable to afford a deposit on an older home, as well as a new build property.
Furthermore, he declared an extension of the Help to Buy initiative, formerly known as First Buy, which includes £3.5 billion for shared equity loans plus an interest free loan worth 20 per cent of the value of a new build property. Under its former guise, this scheme was only open to first time buyers but from 1 April 2013, Help to Buy, which is reminiscent of Thatcher’s Right to Buy initiative, will be available to all buyers of newly built homes.
The scheme will allow purchasers to put down a 5 per cent deposit on a new build home up to a value of £600,000 and they can apply for a 20 per cent Government equity loan which is interest free for five years. After this period the purchaser will have to pay a 1.75% annual fee. The loan will be repayable when the home is sold.
Catherine Penman, head of Research at Carter Jonas, comments, “Osborne stuck to his objective today and rigidly followed the Government’s extended austerity plans. The Chancellor’s budget was fiscally neutral with minimal surprises. However, the construction sector is set to benefit from the extension of the shared equity scheme, with interest-free loans up to a maximum of 20% of the value of new-build properties. In addition, bank guarantees to underpin £130 billion of new mortgage lending from 2014 for three years on all properties may provide a kick start to the residential property sector, hopefully fuelling activity and improving confidence and market sentiment during 2013.”
For more information on Help to Buy go to http://www.hm-treasury.gov.uk/10012.htm