Affordable new housing made possible for first-time buyers?

November 21, 2011

CIA Let Property Blog

The Government have revealed a new scheme to deal with an increasing shortage of affordable homes. This means there are plans to allow first-time buyers of new homes to borrow up to 95% of the property value, then the Government will underwrite part of the risk.

Starting from July 2012, this scheme will build up to 16,000 new homes which then will create up to 32,000 jobs. This initiative is going to be for England only. The Government are adding a £400m fund to this which they are hoping will help schemes that are ready to go but need financial backing.

The ‘radical’ new plans, the Government call them, have been shunned down by the Labour party who think David Cameron and ministers have failed to deliver on housing.

With the economic climate being the way it is at the moment, the Government have made building more homes one of their economic priorities. House priced and rents remain high at the end of 2011, the average first-time buyer is now very close to 43 years old, this being because mortgage lending is so strict and restricted.

Between 2010-11 6% fewer houses were made available than the previous year.

Labour have said the Government should have got to grips with this in their first year of power, and now the situation is getting worse in parts of the country.

Projects that have had funding problems will now get help from ministers to stop this housing decline.

Developers will have to fight for funding to take their projects forward but they must meet a certain criteria, the main one is to provide affordable homes. The Government are calling this the ‘Get Britain building fund’. By 2015, the Government are hoping that around 450,000 affordable homes will be built and available. Many of which will be on publicly owned Brownfield sites.

With moved echoing the Thatcher Government in the 1980’s – potential buyers will get help by letting tenants of social housing have the right to buy their home. The price of the property will be halved and the money from that will be used to build even more affordable housing.

A mortgage indemnity scheme is expected to be offered to first-time buyers, they will be able to borrow up to 95% of the property value.

Grant Shapps, Housing Minister has told BBC Breakfast* that the Government are not ‘pumping up’ the housing market but they want to help people get on the property ladder in a ‘responsible’ way.

“What we want to do is to make it easier for first-time buyers who say the biggest problem is the amount of deposit we have to get together”, he said “This is the biggest blockage”.

The UK could be facing a domino effect situation, David Cameron has been quoted saying that “Lenders won’t lend, so builder can’t build and buyers can’t buy”.

David Cameron and Nick Clegg, his deputy, have said, “That the lack of confidence is visible in derelict building sites and endless for sale signs”, they added, “With that this is doing huge damage to the economy and society”.

The Prime Minister will reveal his plans when he delivers a speech at the CBI annual conference, then will make a statement to parliament.

John Cridland, CBI Director General, said that the UK needs a ‘bold package to get the housing market going again’.

First-time buyers at the moment cannot rely on help from their parents for their deposits and they needed assistance to ‘bridge the gap’, the gap being what banks will lend and the market value of houses.

As mentioned previously, Labour have said that this strategy has come too late and does not go far enough.

Labour have asked ministers to levy a £2bn tax on bank bonuses, this would pay for 25,000 homes and would create 100,000 new construction jobs for the younger generation. This is part of their five-point plan for boosting growth.


*Source- BBC

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