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Budget 2013 – housing and property changes

Chancellor announces £3.5bn Help To Buy scheme

George Osborne

Chancellor of the Exchequer George Osborne has announced plans to boost the housing market by launching a ‘Help to Buy’ scheme to support potential home buyers who have at least a 5% deposit.

Describing the widespread struggle to afford a home as a ‘setback to social mobility’, George Osborne today unveiled the government’s ‘Help to Buy’ scheme, which the Chancellor said will offer ‘great support to home buyers and builders.’ 

The scheme will be available to anyone looking to get on or move up the housing ladder, not just to first-time buyers. The scheme consists of two elements:

‘Help to buy’: Shared equity loans

Some £3.5bn of capital spending will be used to fund the provision of equity loans. This scheme builds on the existing First Buy scheme, which was available exclusively to first-time buyers with an income of under £60,000. 

From next month, all prospective home buyers with a minimum 5% deposit will be able to take advantage of a government loan worth up to 20% of the value of a new-build property. This will be interest-free for five years and is repayable once the home is sold. 

Watch our video to see our take on the new scheme, and the other announcements made in the 2013 Budget. 

 

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The scheme will run for three years from 1 April 2013 and is available on all new-build homes worth less than £600,000.

‘Help to buy’: Mortgage guarantee

Chancellor George Osborne also introduced a Mortgage Guarantee scheme, which he said will ‘dramatically increase’ the availability of mortgages by encouraging lenders to provide mortgages for people with smaller deposits. 

The scheme will also be available to existing homeowners who are looking to re-mortgage to a different lender with a high loan-to-value. Since the financial crisis, the availability of high LTV lending has seen a sharp drop, meaning that homeowners have had difficulty moving to a more competitive offer. 

A mortgage eligible for a guarantee under the scheme will need to have a loan-to-value of between 80% and 95%. The scheme will run for three years from January 2014 and is available on both new build and existing homes.

Households feeling the squeeze

Which? research reveals two in every five of households with a mortgage and who are renting privately are feeling the squeeze in some form (39% and 41%, respectively). However renters are more than three times as likely to have defaulted on a loan, bill or housing payment than those who have mortgages and seven times as likely as those who own their home outright.

While people are happy with their homes, there is significant worry about mortgage rates and negative equity. Over one in five social renters and over one in four private renters are worrying about mortgage rates.

Some 9% are cutting back and have defaulted on a bill or rent or mortgage payment, which equates to over 2 million households and 21% are worried about having their home repossessed.

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