First-time buyers will be able to borrow 95% of the value of their new build homes, with the mortgages underwritten by government, it was announced today.
The new build indemnity scheme will be led by the Home Builders Federation and the Council of Mortgage Lenders for up to 100,000 first-time buyers. The first loans under the scheme will be available in spring 2012 and it will be open to all house builders and lenders operating in England who wish to participate.
Launching the Housing Strategy for England at the Confederation of British Industry annual conference, Prime Minister David Cameron said: “The consequence of the credit crunch is that the lenders won’t lend, the builders won’t build and the buyers won’t buy. Nobody wants another borrowing boom but when first time buyers on a good salary can’t get a reasonable mortgage the market grinds to a halt. And that ricochets round the economy hitting builders, retailers and plumbers alike.”
Under the scheme, house builders will deposit 3.5% of the sale price in the indemnity fund for each home sold and the government will provide additional security for the loan in the form of a guarantee. In the event of repossession, the lender will be able to recover any losses on mortgages to the maximum covered by the scheme.
In addition, Cameron spoke to the CBI conference about lending to small and medium-sized businesses, saying the government will pump more money into the economy to ease lending to SMEs.
He said: “I know that it can still be a nightmare for companies wanting to borrow money and that’s why next week the chancellor will say more about plans for a new Credit Easing scheme. This will use the strength of the government’s balance sheet to pump billions of pounds into reducing the cost of loans for small and medium sized businesses.”
For more information: Laying the Foundations: a Housing Strategy for England
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