Rishi Sunak is preparing to announce a new scheme to help home buyers with low deposits (Picture: Getty)
A new scheme that will allow people with small deposits to buy a new home is set to be launched in a bid to ‘fire up’ the housing market.
Chancellor Rishi Sunak will unveil a mortgage guarantee scheme in his Budget on Wednesday.
It will provide incentives to lenders to provide mortgages to buyers with just 5% deposits who wish to purchase properties worth up to £600,000.
Unlike previous Government-backed schemes, it won’t be restricted to first time buyers or new build homes.
Mr Sunak will detail on Wednesday how the Government will offer lenders the guarantee they require to provide mortgages covering the remaining 95% of a property’s price.
The Treasury said low-deposit mortgages have ‘virtually disappeared’ because of the economic impacts of the coronavirus pandemic.
Prime Minister Boris Johnson said: ‘I want generation rent to become generation buy and these 95% mortgage guarantees help to deliver this promise.
‘Young people shouldn’t feel excluded from the chance of owning their own home and now it will be easier than ever to get onto the property ladder.’
The Treasury said low-deposit mortgages have ‘virtually disappeared (Picture: Getty)
The scheme, which will be subject to the usual affordability checks, will be available to lenders from April.
It is based on the Help to Buy mortgage guarantee scheme introduced in 2013 by David Cameron and George Osborne, that ran until June 2017.
Aiming to reinvigorate the market following the 2008 financial crisis, that scheme – distinct from the Help to Buy equity loan scheme – was said to have helped more than 100,000 households buy a home across the UK.
But there were also concerns that it artificially inflated prices and housebuilders’ profits.
Rishi Sunak is preparing to announce his budget on Wednesday (Picture: Getty)
Mr Sunak said: ‘Owning a home is a dream for millions across the UK and we want to help as many people as possible. Saving up for a big deposit can often be difficult and the pandemic has meant there are fewer low deposit mortgages available.’
The Chancellor also issued warnings about the scale of the damage caused by the pandemic, suggesting he could use the Budget to begin making hard decisions to repair public finances.
He told the Financial Times there are ‘enormous strains’ and that the UK is ‘exposed’ to changes in the currently low interest rates.
A rise of 1% would cost £25 billion a year in debt repayments in the wake of vast spending to sure up the economy.
Some fear Government-backed schemes help to inflate property prices (Picture: PA)
‘We went big, we went early, but there is more to come and there will be more to come in the Budget. But there is a challenge and I want to level with people about the challenge,’ Mr Sunak said.
The Government is braced for the possibility of a rebellion from Tory MPs over any tax rises, with backbenchers being warned they could be kicked out of the parliamentary party if they vote against the Budget.
Among the wings of the Conservative party where friction could come from is the Northern Research Group of around 65 MPs, some of whom helped secure Mr Johnson’s majority by turning former Labour strongholds blue.
One member, the Carlisle MP John Stevenson, suggested the Chancellor should wait until the autumn before winding up support packages and even then he should continue stimulating the economy through the ‘levelling-up’ agenda.
Rishi Sunak is under pressure from all sides as he finalises his latest budget (Picture: HM Treasury)
‘We’re not through the pandemic yet, we’ve still got a few months to go, so we want to see continuing support and we’ll probably have a much better idea of where the economy is come the autumn,’ he told BBC Radio 4’s Today programme.
‘As soon as we can get back to that levelling-up agenda which we were all elected on in 2019, we believe that in the north we have a major contribution to make to the recovery.’
Among the measures he wants extended is the £20 weekly uplift to Universal Credit, but he also said it is ‘too early’ for tax rises, adding: ‘The way out of this is to actually grow the economy.’
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