The Chancellor could offer more help to borrowers with small deposits, says the Sunday Times Teresa Hunter.
House builders are expecting the Chancellor to announce a boost to mortgage support schemes in the impending Budget this week.
An extension to the flagship ‘New Buy Scheme’ is likely to be announced on Wednesday according to the Homes Builders Federation.
The initiative, said to be worth a whopping £1bn, was launched to help up to 100,000 buyers get on the housing ladder or trade up to a bigger property – say from a flat to a house. However take up has been slow and therefore the target was lowered to 25,000.
Home builders are also calling for an expansion of ‘First Buy’, the shared equity scheme, while banks have been lobbying for a relaxing of capital rules to make it easier to lend to buyers with small deposits.
How ‘New Buy’ Works…
Borrowers are able to secure a mortgage on a new build property with a 5% deposit, as opposed to the standard 10%.
The house builder places a 3.5% bond with the lender as security against the borrower defaulting. Then the government effectively guarantees the remaining 1.5%, reducing the lenders risk to the equivalent of a 90% advance.
Although the scheme started off relatively slowly with less than 250 per month this has risen to 520 per month.
Interest rates on ‘New Buy’ mortgages tend to be slightly lower than a typical 95% loan and although the scheme is due to end in 2015, the building industry has been lobbying for an extension of at least two years and possibly even three to 2018.