Wednesday 20 March 2013

Budget 2013: Millions get help to buy new homes, says George Osborne

Millions of families will be offered Government help to buy new homes without saving up a big deposit under a major scheme unveiled by George Osborne.

The Chancellor said the scheme will be available to everyone who wants to buy a home, old or new, under the Help to Buy scheme from 2014.

He will help people get on or move up the property ladder by offering Government "mortgage guarantees" totalling £130 billion. Prospective buyers would contribute 5 per cent of the value of the property and the Government will guarantee another 15 per cent.

This will mean people can afford a bigger mortgage with a small deposit. Effectively, the buyer would be getting a 95 per cent mortgage where the bank might currently only have lent them 80 per cent of the value of the property.

Many people have struggled to save up enough since banks scrapped their best mortgage lending deals after the financial crisis.

The Chancellor said the scheme will be available to everyone who wants to buy a home, old or new, under the Help to Buy scheme from 2014.

He will help people get on or move up the property ladder by offering Government "mortgage guarantees" totalling £130 billion. Prospective buyers would contribute 5 per cent of the value of the property and the Government will guarantee another 15 per cent.

This will mean people can afford a bigger mortgage with a small deposit. Effectively, the buyer would be getting a 95 per cent mortgage where the bank might currently only have lent them 80 per cent of the value of the property.

Many people have struggled to save up enough since banks scrapped their best mortgage lending deals after the financial crisis.

In a separate part of the initiative, the Government will offer interest-free loans for five years if people want to buy new-build homes.

The loans will be worth up to 20 per cent of the value of a newly-built homes, with the buyer contributing 5 per cent as a deposit.

They will be available to anyone who wants to buy a new-built home worth up to £600,000 and repaid only when the property is sold.

The Help-to-Buy schemes will support millions of people who currently cannot afford deposits to buy a new home, as long as they pass credit checks.

Previous schemes have only helped first time buyers and those with an income of less than £60,000.

"It's a great deal for homebuyers," Mr Osborne said. "It's a great support for home builders. And because it's a financial transaction, with the taxpayer making an investment and getting a return, it won't hit our deficit."

The new Help to Buy scheme was a surprise bit of good news for families struggling with the cost of living and high house prices.

Mr Osborne also cut a raft of planned increases in beer duty and scrapped a 3p rise in fuel duty due later this year.

The Chancellor also extended help to low earners by raising the personal allowance to £10,000, meaning people earning less than this threshold do not have to pay any income tax at all.
He also cut the National Insurance contributions paid by small businesses, so it will be easier for them to hire new staff.

However, the overall picture on the economy was gloomy, as the Chancellor admitted growth will be half as much as expected at 0.6 per cent this year. There will also be an extra year of austerity as it will take an longer to start bringing down the national debt.

He said the economy will avoid a recession but take "longer than anyone hoped" to get back on track

“The problems in Cyprus this week are further evidence that the crisis is not over, and the situation remains very worrying,” he added.

To help cope with the outlook, Mr Osborne ordered an extra £11.5 billion of Whitehall spending cuts.

He said capping public sector pay increases at one per cent will have to continue for another year into 2015 and 2016. Thousands in the civil service will also lose the right to automatic annual increases in their salaries just for long service.

Corporation tax will also be cut by a further percentage point to 20 per cent by 2015 in an effort to boost business investment. The Treasury will also do deals with Jersey, Guernsey and the Isle of Man to crack down on tax avoidance.

In another effort to boost the economy, Mr Osborne gave Mark Carney, the new Governor of the Bank of England, a bigger role in setting monetary policy to help rescue the nation's finances.


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