£130billion to help housebuyers
A state-backed mortgage guarantee scheme worth £130billion will see the market flooded with 500,000 cheap loans.
The Government is to subsidise deposits and provide state backing for loans to help homebuyers get on the property ladder or move up.
The Help to Buy scheme will offer loans to top up the deposits of those buying newly built properties worth up to £600,000 who can only put up 5 per cent of the loan themselves.
The Treasury will add an extra 20 per cent of the house value to enable them to get a mortgage. The first five years of the loan will be interest free. After that it will attract a 1.75 per cent payment, which will rise annually by inflation plus 1 per cent.
Borrowers will be able to apply from April 1 and be able to repay the loan at any point. This part of the scheme is worth £3.5billion.
The second, bigger, part – available from next January – will guarantee £130billion of mortgages on any property, not just newbuild, worth up to £600,000.
The scheme will be available for mortgages of between 80 per cent and 95 per cent of the home value.
So for someone able to muster a 5 per cent deposit, the Government would put in 15 per cent, to enable the homebuyer to access an 80 per cent mortgage loan.
If a borrower’s property is repossessed, the Government will bear a proportion of the losses, with the lender taking the rest.
The Treasury says all major lenders have agreed to take part in the scheme.
“This sounds like an excellent idea for people struggling to save for a deposit” says Greengates Builders Merchants Accrington.