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| Version 2 | Version 3 |
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| Budget 2013: Chancellor extends home-buying schemes | Budget 2013: Chancellor extends home-buying schemes |
| (about 1 hour 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 newly built 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. |
| Thereafter borrowers will have to pay a 1.75% annual fee, which will then rise by 1% above the Retail Prices Index (RPI) measure of inflation. | Thereafter borrowers will have to pay a 1.75% annual fee, which will then rise by 1% above the Retail Prices Index (RPI) measure of inflation. |
| 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 of newly built homes. 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 newly built homes up to the value of £600,000. | It will cover newly built homes up to the value of £600,000. |
| Borrowers will be able to apply from April 1st 2013. | Borrowers will be able to apply from April 1st 2013. |
| Mortgage help | Mortgage help |
| The chancellor also announced a new mortgage guarantee, which he claimed would dramatically increase the availability of loans. It extends the previous NewBuy Guarantee scheme to include older houses as well as new-builds. | The chancellor also announced a new mortgage guarantee, which he claimed would dramatically increase the availability of loans. It extends the previous NewBuy Guarantee scheme to include older houses as well as new-builds. |
| "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. |
| That is a relatively small proportion of the total mortgage market, which is worth £1.2 trillion, according to the Council of Mortgage Lenders (CML). | That is a relatively small proportion of the total mortgage market, which is worth £1.2 trillion, according to the Council of Mortgage Lenders (CML). |
| 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, he or she would stand to lose their 5% deposit. Thereafter the government would have to pay just under 15% of the outstanding amount, while the lender would be liable for just over 80%. | If a borrower defaults on a mortgage, he or she would stand to lose their 5% deposit. Thereafter the government would have to pay just under 15% of the outstanding amount, while the lender would be liable for just over 80%. |
| But in theory, lenders taking part will be happier to accept smaller deposits as security for loans. | But in theory, lenders taking part 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%. | 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. |
| The news was also welcomed by lenders. | 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. | "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. | "Crucially, this scheme will not only help first-time buyers, but also second-steppers," he added. |
| But buy-to-let landlords will not be allowed to take advantage of the scheme. | But buy-to-let landlords will not be allowed to take advantage of the scheme. |
| Reservations | Reservations |
| The Royal Instituition of Chartered Surveyors (RICS) warned that the new scheme could represent a risk for the government. | The Royal Instituition of Chartered Surveyors (RICS) warned that the new scheme could represent a risk for the government. |
| "The government needs to be careful this doesn't create another housing bubble - pushing prices up at the expense of buyers," said Simon Rubinsohn, chief economist at RICS. | "The government needs to be careful this doesn't create another housing bubble - pushing prices up at the expense of buyers," said Simon Rubinsohn, chief economist at RICS. |
| However, he welcomed Help to Buy overall, saying it was much needed, and that it would prevent prolonged market stagnation. | However, he welcomed Help to Buy overall, saying it was much needed, and that it would prevent prolonged market stagnation. |
| The Home Builders Federation (HBF) said lenders would need to come on board, but suggested sales should rise as a result. | The Home Builders Federation (HBF) said lenders would need to come on board, but suggested sales should rise as a result. |
| "Extending NewBuy to the second hand market should create churn in the market place and drive up sales across the Board - including for new homes. | "Extending NewBuy to the second hand market should create churn in the market place and drive up sales across the Board - including for new homes. |
| "We do, though, need to ensure a level playing field across the whole market," said Stewart Baseley, of the HBF. | "We do, though, need to ensure a level playing field across the whole market," said Stewart Baseley, of the HBF. |
| The previous NewBuy scheme was launched a year ago, but has resulted in only 1,500 new homes being sold in its first nine months, compared with a government target of 100,000. | |
| "The maths suggest that the chancellor has 110,000 shared equity homes in his sights under the Help to Buy scheme" said Frank Nash, from Chartered Accountants Blick Rothenberg. |