The Government is set to launch a radical plan aimed at kick-starting the housing market.
The aim is to let first-time buyers of new homes borrow up to 95% of their value – the Government will then underwrite part of the risk.
This will form part of an overall scheme which will not only help more people get in the housing ladder but also get the building trade moving with new developments.
The £400million scheme – an initiative for England only – will start in July. It is hoped that around 16,000 new homes will be built and up to 32,000 jobs created.
The investment comes at a critical time for the housing market. With lenders still reluctant to grant mortgages to many first-time buyers, the market is in a state of inertia.
A toxic combination of narrow lending criteria and the possible on-set of another recession has seen house building reach its lowest level for decades. As a result, the average age of a first-time buyer is now estimated at a staggering 43 years.
Richard Gordon of UKPI commented: “Any Government initiative to kick-start the housing market is to be broadly welcomed. The adverse lending conditions have left many buyers unable to obtain the funding they need and as a result, many new developments have stalled. It is only government policy that can change that situation in the short-term.
“However, I am somewhat nervous about encouraging people to once again borrow such a high percentage of the price. Surely this is what caused the current problems in the first place? We need to see the detail as to what happens when borrowers under the scheme default.”