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Autumn Statement: Mortgage scheme could boost housing by 30pc

Government plans to introduce a guarantee for up to 100,000 new mortgages at up to 95 per cent of the property value could boost housing completions by 30 per cent, initial estimates suggest.

The scheme, led by the Home Builders Federation and Council of Mortgage Lenders will be open to all housebuilders and applies to all new build properties.

It was at the centre of the government’s new housing strategy published on Monday, described by Prime Minister David Cameron as “radical and unashamedly ambitious”.

The first guaranteed mortgages are expected to be available from March 2012.

Lenders representing 80 per cent of the market – including Barclays, HSBC, Lloyds, Nationwide, RBS, Santander and Yorkshire and Clydesdale Banks – have agreed in principle to participate.

Over 25 of the country’s largest housebuilders have also signed up, representing more than 60 per cent of current completions.

Buyers will have access to mortgages of up to 95 per cent loan to value, with housebuilders contributing 3.5 per cent of the value into an indemnity fund and the government supporting the fund to a total of 9 per cent of the property value.

The indemnity fund pays out to the lender if a property financed under the scheme is repossessed and there is a shortfall.

Housebuilders will take the first loss in the indemnity, with government only being called upon to pay once the builder’s fund has been exhausted.

Final details, such as a cap on the value of properties eligible under the scheme, are yet to be agreed.

It will be administered by the Department for Communities and Local Government and will be available in England only.

The scheme was among the top priorities pursued by the HBF over the last year and its introduction was warmly welcomed by the industry.

Grainger executive property director Nick Jopling said it would “greatly support housing supply and significantly ease the housing crisis”.

“The scheme could bring about a 10-15 per cent increase in housing supply in the first full year to as much as 25-30 per cent over the following two years,” he said.

Barratt was among the first housebuilders to agree in principal to the scheme and chief executive Mark Clare immediately introduced measures allowing customers to pre-register their interest on the company’s website.

“This is exactly what the industry needs to ensure that customers can buy and we can build the homes the nation so desperately needs,” he said.

But DTZ head of residential Chris Cobbold warned the guarantees would have a “modest” impact as overall lending levels remain at half of their pre-2008 long-term average.

The housing strategy also highlighted the importance of the private rented sector, a significant potential growth area for housebuilders.

It pledged an independent review of the barriers to investment in private homes to rent and support for models of development, where homes are built specifically for the private rental market, funded by investors with a medium to long-term interest.

Pilot projects will be introduced to develop the approach, the strategy says.

Mr Cobbold said institutional investment in the sector would be a “game changer” and welcomed government’s recognition of its importance.

But CBRE head of residential research Jennet Siebrits said she was “disappointed that the government’s new strategy largely reiterates previous proposals that are currently underway”.

“There have already been a number of independent reviews to analyse the barriers to large-scale investment in the private rented sector and what we need now is action,” she said.

The strategy introduced a number of other policies designed to boost the market.

There were 103,750 housing starts in 2010/11, while DCLG projects the number of households will grow by 232,000 per year until 2033.

For all the news on government announcements around the Autumn Statement, see CN’s dedicated webpage.

Housing Strategy headline announcements:

  • A £400m Get Britain Building funding pot, designed to get stalled schemes restarted and expected to help build 16,000 homes.
  • A competition inviting councils and communities to identify sites for large scale development, which will take advantage of a streamlined planning processes
  • Right to Buy discounts increased to 50 per cent with receipts re-invested into new homes
  • £50m funding to bring empty homes back in to use
  • £30m funding for self-builders

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