Britain launched incentives to help struggling home buyers on Wednesday as the government looks to support growth in a real estate market it sees as key to reviving the country's ailing economy.
Finance minister George Osborne said Britain would commit 3.5 bln pounds ($5.3 bln) over the next three years to shared equity loans for new-build homes worth less than 600,000 pounds, allowing buyers to purchase them with a 5% deposit.
"For newly built housing, government will put up a fifth of the cost," he said in a budget speech to parliament. That loan would be interest-free for five years and the scheme open to all buyers.
The government will also guarantee 130 bln pounds of mortgages from 2014 for three years, allowing banks to provide more loans to people without big deposits.
Britain's housing market has been stuck in the doldrums for years, due to a combination of high prices, stagnant incomes and a banking sector that the financial crisis has made reluctant to hand out mortgages.
Shares in homebuilders rose sharply after Osborne's announcement, which the industry said could help kick-start the market.
Jefferies analyst Anthony Codling said the shared equity scheme could help up to 74,000 home buyers over three years, equating to about 25% of the current new-build output.
The mortgage guarantee could support about 800,000 mortgages, representing a 30% increase in housing transactions over the 844,000 conducted during 2012, he said.
The new plan, called Help to Buy, builds on New Buy, which enabled buyers to purchase homes worth less than 500,000 pounds with a 5% deposit, and a shared-equity scheme for first-time buyers called First Buy.
The Royal Institute of Chartered Surveyors (RICS), which represents property professionals, said that the measures were "much-needed" but that the government "needs to be careful this doesn't create another housing bubble - pushing prices up at the expense of buyers."
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