LONDONâ€"The British government on Tuesday began the second phase of a new program aimed at igniting home buying, in part by guaranteeing up to 15 percent of mortgage loans.
Consumers have complained that they can’t afford to purchase new homes or apartments in Britain because many banks have required a 20 percent down payment since the financial crisis.
The downturn in Britain’s housing market after the financial crisis wasn’t as severe as the United States or other parts of Europe. But the rapid increase in housing prices in London and other hotspots in recent years has made it difficult for first-time buyers to scrape together enough in savings for hefty down payments currently required for home and apartment purchases.
“Help to Buy is going to make the dream of home ownership a reality for many who would otherwise have been shut out,†Mr. Cameron said in a statement. “This goes right to the heart of my vision for Britain-a country where everyone who works hard can get on in life.â€
Some lawmakers have objected to the plan. On Tuesday, a Parliament committee issued a report saying the program may lead to higher home prices in Britain in “the short-to-medium term.†The amount of residential housing being put up for sale is lagging demand in Britain, which could result in “further upward pressure in prices over the coming months,†said Peter Bolton King, global residential director for the Royal Institute of Chartered Surveyors.
The Parliament panel, called the Commons Treasury select committee, also expressed concern that taxpayers may be forced to shoulder losses for lenders and that the program, designed to be temporary, could become permanent.
Consumers in Britain can begin applying for the down payment loans through units of Royal Bank of Scotland on Tuesday, and other banks will soon join the program. However, it can take several months for the mortgage process to be completed.
The British government will guarantee up to 15 percent of those loans on homes worth up to £600,000 ($964,200), beginning in January. Under the program, the buyer would, in essence, put 5 percent down and the government would guarantee the next 15 percent, as if the buyer put down a 20 percent down payment.
In the first phase of the £12 billion program, the British government agreed to loan first-time buyers and other buyers of new construction homes up to 20 percent of the purchase price of a home valued at £600,000 or less. About 15,000 people have taken advantage of the government-lending portion of the program.
The second, expanded phase of the initiative would include commercial banks offering similar down payment loans. Lloyds Banking Group and Royal Bank of Scotland, which both received a government bailout during the financial crisis, have agreed to offer low interest-rate loans to qualified consumers. HSBC, Aldermore Bank and Virgin Money, part of Sir Richard Branson’s Virgin empire, also have announced plans to participate.
“We want to support our home owning and home buying customers and recognize that particularly for first time buyers, building the necessary deposit can be a real challenge,†said Antonio Simoes, chief executive of HSBC’s U.K. bank, in a statement.
In a separate report Tuesday, the Royal Institution of Chartered Surveyors said that residential home sales in Britain nearly hit a four-year high in September. Prices in September increased in every part of the country, except Britain’s North East, according to the group. Home prices have steadily increased in Britain since Easter.
Average housing prices in England and Wales rose 1.3 percent over the previous year to £164,654 in August, according to the most recent data available from the Land Registry, a government body that tracks property sales.
However, prices were up annually 7.1 percent to £389,066 in London in August.
