Britain’s biggest house builders have pledged to build more homes on the back of the government’s efforts to improve mortgage availability.
Chancellor George Osborne announced a new, two-strand ‘help to buy’ scheme in his Budget speech on Wednesday, promising to increase the supply of high loan-to-value mortgages and release equity for buyers.
Berkeley, Persimmon and Galliford Try all confirmed they would build more to meet the expected increase in demand from people hoping to own a home.
The equity loan component of the new scheme will provide £3.5 billion of investment supporting up to 74,000 home buyers over the next three years. Buyers will be able to access equity loans worth up to 20 per cent of the value of a property, which will be interest-free for five years and repayable when they sell the home.
Alongside this, the government plans to offer a guarantee to lenders which offer mortgages to people of between 5 and 20 per cent from April 2014. It will be open to first-time buyers and existing homeowners.
Tony Pidgley, chair of Berkeley, said: ‘The biggest problem has always been the mortgages and this is a meaningful number. We will be able to build extra homes because of this.’
Ashley Lane, group partnerships director at Persimmon Homes, said: ‘This Budget will result in increased building levels by Persimmon. It will allow us to build more homes.’
Mark Clare, chief executive of developer Barratt, said he was also expecting to see an increase in demand for homes.
Shares in the major house builders were rising on the back of the announcement, as Inside Housing went to press.
Mr Osborne also boosted the government’s build-to-rent programme by £800 million. The fund, which now stands at £1 billion, provides equity or loan finance to developers building homes for private rent and was launched in response to last year’s review by Sir Adrian Montague into ways to attract institutional investment into the sector.
The initial £200 million opened for bids in December and was heavily oversubscribed, with some of the UK’s largest housing associations applying for funding.
Landlords welcomed additional build-to-rent cash and the extra £225 million provided for the affordable homes guarantee fund that is intended to produce 30,000 homes once the £1.8 billion affordable homes programme completes in 2015.
The grant from these funds is intended to work alongside the government’s £10 billion housing guarantee programme, which aims to reduce the cost of debt.
Landlords lamented the fact the government failed to reveal its policy on the future of rents, instead putting it off until the June spending review.
Penny Downing, director of development, at Bromford Group, said: ‘The lack of rental commitment provides more uncertainty and we need to end the uncertainty so planning can be more effective across the whole sector.’
Existing government schemes launched to boost house building and buying:
‘If “help to buy” encourages housing transactions in the way everyone hopes, I think this will encourage us and all house builders in the market to build more than currently.’
Stephen Teagle, managing director of affordable housing, Galliford Try
‘The extra £225 million is insufficient to meet the needs in the sub-market rent category. That is where housing associations have a role to play in using our surpluses.’
Waqar Ahmed, finance director, London & Quadrant
‘It seems like the government is giving us grant post-2015 by other means. We still have resources put aside, so Orbit will put a bid in for the affordable housing funding. There will be interest and I imagine most associations will want to be at the table.’
Paul Tenant, chief executive, Orbit
‘For something the government said is one of the highest priorities, I expected to see more on housing. The demand-side will go some way towards helping the market but I wanted to see more on the supply-side.’
Mark Henderson, chief executive, Home Group
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