In the Budget Chancellor George Osborne announced new plans to help people buy their own homes. The Help to Buy scheme, which began on 1 April, expands a previous initiative, FirstBuy, which was aimed solely at first-time buyers.

The new scheme will be available to anyone wishing to buy a newly built home up to the value of £600,000. Purchasers will only need to put down a 5% deposit - much less than most banks currently demand – with up to a further 20% of the cost of the home funded by a shared equity loan backed by the government - interest-free for the first five years. The remainder of the value of the property is paid for using a standard mortgage, covering up to 75% of the loan.

The value of the shared equity loan is linked to the property's value. So, for example, if the value of the property has doubled by the time the shared equity loan is repaid, the amount the borrower has to repay will have doubled too. In year six, borrowers will have to pay a 1.75% annual fee, which will rise by 1% above the Retail Prices Index (RPI) measure of inflation every year after that.

The chancellor also announced a new mortgage guarantee, which aims to dramatically increase the availability of loans. It extends the previous NewBuy Guarantee scheme and includes older houses as well as new-builds. It will run for three years from the start of 2014 and will be used to support £130bn of mortgages.

George Osborne said, "We're going to help families who want a mortgage for any home they're buying, old or new, but who cannot begin to afford the kind of deposits being demanded today."

However, according to the Council of Mortgage Lenders that is a relatively small proportion of the total mortgage market, which is estimated to be worth £1.2 trillion.

There is also a warning from The Royal Institution of Chartered Surveyors (RICS) that the new scheme could represent a risk for the government. "The government needs to be careful this doesn't create another housing bubble - pushing prices up at the expense of buyers," said Simon Rubinsohn, Chief Economist at RICS.

Rubinsohn did however welcomed Help to Buy scheme overall, saying it was much needed, and that it would prevent prolonged market stagnation.

Meanwhile the Home Builders Federation (HBF) said lenders would need to come on board, but suggested sales should rise as a result. Spokesman for HBF Stewart Baseley said, "Extending NewBuy to the second hand market should create churn in the market place and drive up sales across the board - including for new homes. We do, though, need to ensure a level playing field across the whole market.”

According to a report by the BBC the previous NewBuy scheme launched a year ago, resulted in only 1,500 new homes being sold in its first nine months, compared with a government target of 100,000.


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