Government to underwrite mortgages
Monday 21 November 2011
The Government is set to underwrite mortgages for first-time buyers as part of efforts to "unstick" the housing market.
Prime Minister David Cameron and his Liberal Democrat deputy Nick Clegg said they wanted to support the construction industry and make the "dream of home ownership" a reality for more people.
The drive also includes a £400 million scheme targeting housebuilding schemes that have stalled through a lack of development finance.
But Labour branded the action "small beer" and insisted far more was needed to get the economy going again.
Fears have been growing of a "perfect storm" in housing, with construction at its lowest since the Second World War, mortgage lending tightly restricted, and rent and purchase prices stubbornly high.
The report - Laying The Foundations: A Housing Strategy For England - sets out details of a range of policies to revive the industry and solve the homes shortage, such as boosting right-to-buy council home discounts.
More public land is also being made available for development, and money has been earmarked to bring empty houses back into use.
The £400 million Get Britain Building fund will target housebuilding schemes that have stalled through a lack of development finance.
It is set to "unlock" the construction of up to 16,000 homes and around 3,200 of those would be affordable properties, according to Downing Street.
The cash injection will also support up to 32,000 jobs, according to officials.
It comes on top of a £500 million Growing Places Fund for development announced earlier this month.
The Government will underwrite the risk of some lending on newly built homes.
It is hoped the move will help first-time buyers get on the property ladder by allowing deposits to drop from 20% to as little as 5%.
In a joint foreword to the report, the Prime Minister and Mr Clegg said: "One of the most important things each generation can do for the next is to build high-quality homes that will stand the test of time. But for decades in Britain we have under-built.
"These problems - entrenched over decades - have deepened over the past few years. The housing market is one of the biggest victims of the credit crunch: lenders won't lend, so builders can't build and buyers can't buy."
They added: "With this strategy, we will unlock the housing market, get Britain building again, and give many more people the satisfaction and security that comes from stepping over their own threshold. These plans are ambitious - but we are determined to deliver on them."
Speaking on a visit to Guildford, Surrey, this morning, Mr Cameron said: "It's not just about the economy, it's also about people's hopes and dreams.
"You always remember that moment, if you've done it, when you get that key and you walk into your first flat, it's a magic moment.
"It's a moment I want everyone in this country to have, not just better-off people.
"The dream of home ownership is something that should be achievable for everyone."
The Prime Minister pointed out that, in some towns, a police officer married to a nurse would simply not be able to get on the housing ladder.
"Those that do the right thing and work hard, we want to do right by," he said.
Shadow chancellor Ed Balls welcomed the steps, but said they did not go far enough.
"I think it is a good start, it at last shows recognition from the Government that we need action now to get the economy moving and to start building houses, get people into jobs," he told the BBC Radio 4 Today programme.
"I am afraid it is rather small beer in its scale, it is a £400 million boost, but George Osborne last year announced a £4 billion cut in housing spending, and we have proposed building 25,000 homes this year and next using the bank bonus tax which would be a considerably bigger boost to jobs in the construction sector.
"At least it starts to show that David Cameron and George Osborne have realised that unless you act to get growth and jobs in our economy you can't get the deficit down and so I think it probably does show that at last the Government is starting to shift."
Mr Balls said Labour would raise £2 billion by repeating its tax on bank bonuses, and use that to cut youth unemployment and build 25,000 homes across the country.
David Orr, chief executive of the National Housing Federation, said the Government deserved credit for trying to tackle the issues.
But he insisted a £1 billion Government investment could generate 66,000 affordable homes, 400,000 jobs and save the taxpayer £700 million in Jobseeker's Allowance.
"Ministers need to be bolder and go much further to fix the broken housing market and they can do it in a way that is effectively cost neutral," he added.
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