Revealed: Fresh details on Government's Help-to-Buy housing scheme

Chancellor met housebuilders and mortgage lenders to flesh out plans to underwrite £130bn of mortgage lending

The Government today insisted only credit-worthy borrowers will be able to buy homes with its expanding housing stimulus programme as it revealed more details on the Help-to-Buy scheme.

Chancellor George Osborne met major housebuilders and mortgage lenders to flesh out plans to underwrite £130 billion of mortgage lending with state guarantees - including banning second home buyers and people with property abroad.

The first stage of Help to Buy was launched in April and offers loans to give people the chance to buy a new-build home with a deposit of just 5 per cent. The scheme has been credited with driving a surge in home sales and driving up prices.

Mortgage guarantees will launch in January and will see the state take on the risk of default by borrowers by guaranteeing a proportion of a home loan.

Extending Help to Buy aims to boost mortgage availability by reducing the risk for lenders, and will cover both existing and newly-built homes.

Guarantees will only be available to borrowers who can afford the mortgages, while those with impaired credit ratings will be excluded, the Treasury insisted. It will include income checks and stress testing.

Guarantees will also not be available for second home purchases, and lenders will be required to collect a declaration stating that the borrower has no interest a property anywhere else in the world. It will not be able to be used in conjunction with another state scheme.

Lenders will pay a fee to use the guarantee, based on loan-to-value banding.

Mr Osborne held a breakfast meeting today at Number 11 Downing Street with executives from builders including Persimmon and Taylor Wimpey as well as major lenders such as Lloyds Banking Group and Barclays.

The guarantee will be be available on homes worth up to £600,000. The state will offer guarantees totalling up to £12 billion on £130 billion of high loan-to-value mortgage lending.

The initial equity loan stage allows people to buy a new-build home worth up to £600,000 with a Government loan of up to 20 per cent, interest-free for five years.

However, the guarantee plans have been widely criticised for risking inflating another housing bubble and piling huge housing risk on the Government.

Former Bank of England governor Lord King warned that the scheme is "too close for comfort" to a general scheme to guarantee mortgages.

The Bank's deputy governor, Paul Tucker, also warned that it would be "unwise" as a medium or long-term scheme.

"This is not a market that needs a permanent subsidy," he said recently. "They (home loan guarantees) are devices for getting out of a hole to dig another one for the future."

Mr Osborne said: "I'm determined to back people who want to do their best for their families. Help to Buy is about getting behind those who aspire to own a home.

"The mortgage guarantee will support an increase in high loan-to-value mortgages for people who can't afford large deposits, and it will also boost housebuilding. As of today lenders have the detail they need to go away and get ready for next January's launch."

The Council of Mortgage Lenders (CML) said the guarantees must be easy to implement and have a "clear exit strategy".

The organisation, which represents banks and building societies, added the scheme must be matched with a similar focus on boosting the supply of new housing to avoid inflating a housing bubble.

CML director general Paul Smee said: "Lenders, whether they choose to participate in the guarantee scheme or stay outside, will continue to do their utmost to meet households' needs for mortgages, but always in a way that is responsible."

Pete Redfern, chief executive of Taylor Wimpey, said: "The second phase of Help to Buy will benefit the whole market, particularly existing homeowners who want to move up the housing ladder but have been unable to do so.

"This will have a direct impact on the second hand market and contribute to the overall health of the housing market with increasing transaction volumes and an increase in housebuilding for the industry and Taylor Wimpey."

PA

News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
Arts and Entertainment
Friends is celebrating its 20th anniversary this year
tvSeries celebrates 20th anniversary
News
news
Life and Style
Jack Cooksey goes for the grand unveiling - moments before dropping his new iPhone 6 on the floor
iphone launch
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Liam Neeson said he wouldn't
tv

Liam Neeson's Downton dreams

Sport
Yaya Touré (left) and Bayern Munich’s Spanish defender Juan Bernat
football
Arts and Entertainment
A spell in the sun: Emma Stone and Colin Firth star in ‘Magic in the Moonlight’
filmReview: Magic In The Moonlight
Sport
A 'Sir Alex Feguson' tattoo
football

Arts and Entertainment
Ben Whishaw is replacing Colin Firth as the voice of Paddington Bear
tv

Thriller is set in the secret world of British espionage

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Primary Supply Teacher - Loughborough

£90 - £120 per day: Randstad Education Leicester: Are you a Teacher looking fo...

Primary General Cover Teachers

Negotiable: Randstad Education Leicester: Are you a Newly Qualified Teacher lo...

Part Time Primary Teacher

£90 - £120 per day: Randstad Education Leicester: Part Time Primary TeacherOur...

Science Technician

£7 - £8 per hour: Randstad Education Cheshire: The Job:School Science Technici...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week