Government working on low deposit mortgage scheme
The Chancellor George Osborne is expected to announce a scheme to help first-time buyers in his autumn statement on November 29, according to a report in The Telegraph.
The statement, which will set out plans to encourage growth in the UK’s economy, could include a mortgage indemnity guarantee scheme, which would see the government underwriting low-deposit mortgages for first-time buyers.
The scheme was suggested by the Confederation of British Industry (CBI) as part of its recommendations on how to unfreeze the housing market.
Since the credit crunch, it has been much more difficult for first time buyers to afford a mortgage because lenders are asking for prohibitively high deposits.
The government’s plan to underwrite mortgages would reduce the risk to lenders if borrowers failed to make repayments, allowing them to offer mortgages to people who can only afford a small deposit.
The Treasury said that news that such a scheme could form part of the autumn statement was “pure speculation”, and pointed out that the scheme would put taxpayer’s money at risk.
In related news, the Council of Mortgage Lenders (CML) is proposing an extension to a scheme that is already helping first time buyers.
First-time buyers are currently exempt from paying stamp duty on sales of up to £250,000, but this exemption is due to end in March next year.
The CML wants the scheme to be extended and has warned that ending the exemption could cause further damage to an already fragile housing market.
Paul Smee, the CML’s director general, said: “The CML believes it would be a mistake to pull the plug on the concession – at least until the housing market returns to a firmer footing.
“First-time buyers need to get the message that the Government supports them as they take their first steps into a housing market where confidence needs to be restored.”