First-time buyers of new homes will be able to borrow up to 95% of their value as part of plans David Cameron says will help get “Britain building again”.

The mortgage indemnity scheme, in which government will underwrite part of the risk, could help up to 100,000 people.

The prime minister said it was part of a wider strategy to deal with an acute shortage of affordable homes and stalled housing projects in England.

Labour said it was “small beer” and did not compensate for earlier cuts.

‘Get building’

Building more homes is one of the government’s economic priorities, with the number of new ones being built at its lowest level since World War II, and with rents and prices remaining high while mortgage lending is restricted.

At the heart of the coalition’s approach is a mortgage indemnity scheme which will enable first-time buyers and others to borrow up to 95% of the value of newly built homes, supported by government guarantees.

KEY PROPOSALS

  • Mortgages of up to 95% of the value of new homes to be offered with government underwriting part of the risk
  • £400m public fund to help developers “unblock” stalled housing schemes
  • Largest discounts for social tenants wanting to own their properties under right to buy
  • More public sector land to be made available for building
  • Planning obligations on stalled projects reviewed
  • Up to £150m to help bring empty housing back into use

Addressing the CBI’s annual conference in London, Mr Cameron said it was not his aim to create “another borrowing boom” but to help the many people who could not afford huge deposits needed to buy properties.

“When first-time buyers on a good salary cannot get a reasonable mortgage, the whole market grinds to a halt,” he said. “And that ricochets around the economy, affecting builders, retailers, plumbers – all the people that depend on a housing market that is moving.”

“If we don’t do something like this we are not going to get this vital market moving… We will restart the housing market and get Britain building again.”

Ministers will also intervene to support building projects which have been approved but delayed by funding problems.

 

A “Get Britain Building Fund” will see developers compete for £400m in funding to take forward “shovel-ready” projects which meet the right criteria, among them a commitment to affordable homes.

This initiative will begin in July and aims to lead to 16,000 new homes being built, providing work for 32,000 people.

It is hoped that about 450,000 mainly affordable homes will be built by 2015, many of them on publicly-owned brownfield sites, although the government is not setting any specific targets.

Other parts of the strategy include empty properties being brought back into residential use and new providers being encouraged to enter the social housing market.

 

To help potential buyers, tenants of social housing are to get the right to buy their home – a hallmark of the Thatcher government in the 1980s – for as little as half the market price.

The money will then be used to build more affordable housing, with ministers saying they will build a new home for every home sold off in this way.

The House Builders Federation said the lack of mortgage availability since the 2008 banking crisis had been “the biggest constraint” on new homes and the indemnity scheme would help to address this.

“In recent years, many people have been unable to realise their dreams of buying a home because of the huge deposits required by lenders,” its executive chairman Stewart Baseley said.

“This scheme will be allow people to buy their new home on realistic terms and help, in particular, hard-pressed first time buyers.”

‘Mismanagement’

But Labour said the government’s “mismanagement” of the economy was holding back housebuilding.

“I am afraid it is rather small beer in its scale,” said chancellor Ed Balls said. “It is a £400m boost, but George Osborne last year announced a £4bn cut in housing spending.”

The opposition have urged ministers to levy a £2bn tax on bank bonuses to pay for 25,000 new homes and 100,000 new construction jobs for young people, as part of their five-point plan for boosting growth.

 

Single mum Kylie Bennett has recently split up with her partner and urgently needs somewhere to live

“I think most people would say that with bank bonuses still very high repeating that tax for £2bn and using it in that way would be a much better way to spend the money and a good boost to jobs and housing.”

Just 121,200 new homes were made available in 2010-11, 6% fewer than the previous year.

Although the decline was not as sharp as in the previous year when the number of new builds and conversions fell by 23%, Labour say the government has failed to get a grip on the problem in its first year in power, and the situation has got worse in some parts of the country.

 BBC News

Leave a Reply