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Budget 2013: Chancellor extends house-buying scheme Budget 2013: Chancellor extends home-buying scheme
(35 minutes later)
Chancellor George Osborne has announced new plans to help people to buy their own homes.Chancellor George Osborne has announced new plans to help people to buy their own homes.
The 'Help to Buy' scheme improves on a previous scheme known as FirstBuy. It enables buyers to put down a 5% deposit on a new home. The 'Help to Buy' scheme improves on a previous scheme known as FirstBuy. It enables buyers to put down a 5% deposit on a newly built home.
Up to 20% of the cost of the home is funded by a "shared equity" loan, which will be repayable when the home is sold.Up to 20% of the cost of the home is funded by a "shared equity" loan, which will be repayable when the home is sold.
That loan will be interest-free for the first five years.That loan will be interest-free for the first five years.
The remainder is paid for with a standard mortgage.The remainder is paid for with a standard mortgage.
Whereas the previous scheme was only open to first-time buyers, this one will be available to all buyers. Previously there was also an income limit of £60,000 a year, but this will no longer apply. Whereas the previous scheme was only open to first-time buyers, this one will be available to all buyers of newly built homes. Previously there was also an income limit of £60,000 a year, but this will no longer apply.
It will cover homes up to the value of £600,000. It will cover new build homes up to the value of £600,000.
Mortgage helpMortgage help
The chancellor also announced a new mortgage guarantee, which he claimed would dramatically increase the availability of loans.The chancellor also announced a new mortgage guarantee, which he claimed would dramatically increase the availability of loans.
"We're going to help families who want a mortgage for any home they're buying, old or new, but who cannot begin to afford the kind of deposits being demanded today," he said."We're going to help families who want a mortgage for any home they're buying, old or new, but who cannot begin to afford the kind of deposits being demanded today," he said.
It will run for three years from the start of 2014 and will be used to support £130bn of mortgages.It will run for three years from the start of 2014 and will be used to support £130bn of mortgages.
The idea is that loans from High Street lenders would be underwritten by the government.The idea is that loans from High Street lenders would be underwritten by the government.
If a borrower defaults on a mortgage, the government will step in to compensate the lender. If a borrower defaults on a mortgage, the government will step in to compensate the lender. In theory, lenders will be happier to accept smaller deposits as security for loans.
Up to now, the best mortgage rates have only been available to those able to put down a deposit of up to 20%.
"It's a great deal for homebuyers," said the chancellor."It's a great deal for homebuyers," said the chancellor.
Another scheme, known as NewBuy, was launched just over a year ago, but it saw only 1,500 house sales in its first nine months. The news was also welcomed by lenders.
"We believe that the mortgage guarantee scheme will give a much-needed boost to the housing market and, most importantly, address the issue of accessibility," said Stephen Noakes of Lloyds Banking Group.
"Crucially, this scheme will not only help first-time buyers, but also second-steppers," he added.
Another scheme, known as NewBuy, was launched just over a year ago, but saw only 1,500 house sales in its first nine months.
If a borrower defaults on a mortgage, the government will step in to compensate the lender. In theory, lenders will be happier to accept smaller deposits as security for loans.
Up to now, the best mortgage rates have only been available to those able to put down a deposit of up to 20%.
"It's a great deal for homebuyers," said the chancellor.
The news was also welcomed by lenders.
"We believe that the mortgage guarantee scheme will give a much-needed boost to the housing market and, most importantly, address the issue of accessibility," said Stephen Noakes of Lloyds Banking Group.
"Crucially, this scheme will not only help first-time buyers, but also second-steppers," he added.
Another scheme, known as NewBuy, was launched just over a year ago, but saw only 1,500 house sales in its first nine months.