House buyers and builders given £130bn Budget boost

20 Mar 13
Government support worth more than £130bn is to be made available to help people buy a home, Chancellor George Osborne announced in the Budget statement.

By Richard Johnstone | 20 March 2013

Government support worth more than £130bn is to be made available to help people buy a home, Chancellor George Osborne announced in the Budget statement.

The launch of the ‘Help to Buy’ scheme will lead to a ‘dramatic’ increase in government support for house builders and those looking to buy their own homes, he said today.

Under the plans, families who want a mortgage to buy a home should be able to access a loan to buy it without a large deposit. Instead, the Treasury will guarantee the mortgage to reduce the cost of the up-front payment, with total backing worth up to £130bn available to lenders.

Osborne told MPs that this intervention by government into the housing market would run for three years from 2014. Given the scale of the support, he added that a future government would need the agreement of the Bank of England’s Financial Policy Committee if they wanted to extend it.

Another aspect of Help to Buy will extend the current New Buy scheme – currently for first time buyers purchasing a new home – to anyone who is looking to purchase a newly built house.

In total, £3.5bn of capital spending will be earmarked for these shared equity loans. Government will provide loans worth as much as 20% of the cost of a new home, which will both reduce the size of the mortgage and deposit required. This loan, which will be interest-free for five years, will be repaid when the home is sold.

Osborne said this would be counted by the Treasury as investment spending and would therefore not increase the size of the deficit.

‘That is a good use of this government’s fiscal credibility,’ Osborne said.

The statement also revealed the government had increased funding to build 15,000 more affordable homes, and would also extend the government’s right to buy initiative so more tenants could buy their own home.

Responding to the statement, the British Property Federation said a housing stimulus would provide the 'missing piece' of the government’s housing strategy.

Director of policy Ian Fletcher said: ‘This is a strong package of help for housing. Annual transactions are half what they were and that has knock on consequences for all those parts of the economy that rely on people moving. ‘Helping people needing a deposit has for some time been cited as the missing piece of a coherent housing policy.’

The National Housing Federation said it welcomed ‘the chancellor’s realisation that people around the country are struggling to buy their own homes’.

Chief executive David Orr said today’s measure ‘may help a number’ of these people.

However, he added there was a danger ‘that if we don’t tackle the fact we’re still not building enough homes, we’ll just create another housing bubble that will continue to push house prices up and out of reach of the majority’.

He urged the government to focus on ‘unlocking investment to build more new homes as a way of managing down the Housing Benefit bill and boosting the economy’.

Osborne also announced that the additional 1% savings being taken from unprotected Whitehall budgets in 2013/14 and 2014/15 would be used to boost infrastructure spending.

But this would not kick in until 2015/16, when completion of current projects meant that capital spending was set to ‘fall back’. This would ‘not be sensible’, he said, so capital spending would therefore increase by £3bn a year. The detailed allocation will be set out in the Spending Review in June.

Osborne also reiterated that the government had accepted the ‘excellent idea’ from Lord Heseltine to create a single funding pot for Local Enterprise Partnerships to bid for, covering transport, skills and housebuilding.

This will ‘support enterprise to give our great regional cities and other local areas much greater control over their economic destiny,’ he said.


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