A state-backed mortgage guarantee scheme worth £130billion will see the market flooded with 500,000 cheap loans. The Government is to subsidise deposits and provide state backing for loans to help homebuyers get on the property ladder or move up. But there were warnings that the scheme risks creating a house price bubble. Scroll down for video . Dangerous? Critics fear that offering government-back mortgages to people who cannot afford a deposit could fuel a new property crisis . The Help to Buy scheme will offer . loans to top up the deposits of those buying newly built properties . worth up to £600,000 who can only put up 5 per cent of the loan . themselves. The Treasury will add an extra 20 per . cent of the house value to enable them to get a mortgage. The first . five years of the loan will be interest free. After that it will attract . a 1.75 per cent payment, which will rise annually by inflation plus 1 . per cent. Chancellor George Osborne is expected to unveil more help for homebuyers and extra investment in housebuilding . Borrowers will be able to apply from . April 1 and be able to repay the loan at any point. This part of the . scheme is worth £3.5billion. The second, bigger, part – available . from next January – will guarantee £130billion of mortgages on any . property, not just newbuild, worth up to £600,000. The scheme will be available for mortgages of between 80 per cent and 95 per cent of the home value. So for someone able to muster a 5 per . cent deposit, the Government would put in 15 per cent, to enable the . homebuyer to access an 80 per cent mortgage loan. If a borrower’s property is repossessed, the Government will bear a proportion of the losses, with the lender taking the rest. The Treasury says all major lenders have agreed to take part in the scheme. On top of this, the Chancellor . announced that more Funding for Lending cash may be made available to . the banks, which could also push rates down lower. Changes to the Bank of England’s . remit, meanwhile, could allow it to give guarantees to borrowers that . interest rates would be low for years to come. Last night Chief Secretary to the . Treasury Danny Alexander refused to say what would happen if property . prices collapse, though he admitted there were ‘risks’ with the scheme. ‘What we are doing is supporting . housebuilders to build more homes, support those hundreds of thousands . of people who can afford mortgage repayments to buy a home but not the . deposit,’ he said. Example: The proposed scheme is split into two separate streams, the first (above) for buyers purchasing new build homes and the second (below) for everyone else . The scheme, which will run for three years, can only be extended if the Bank of England agrees. Ashley Hollinshead, of accountants . Deloitte, said: ‘This move is interesting as for the first time it . attacks every level of the housing ladder, from first-time buyers to . those moving in to a bigger family home. ‘The guarantee could prove extremely effective as it will provide banks with confidence that is desperately needed.’ David Hollingworth, of brokers London . & Country, said: ‘If you are looking to buy a house then there . really could not have been a bigger carrot waved by the Government.’ Changes: The government offered more backing for housebuilding, after figures from the Office for National Statistics showed a sharp drop in output from the construction industry . Sea change: Ministers believe cash-strapped second-steppers are holding up the housing market, and making it harder for first-time buyers to get on to the property ladder . In the last housing boom more than . four million mortgages were taken out every year – but this slumped to . little over a million last year. Latest figures from the Council of . Mortgage Lenders show that roughly two in every three loans taken out . are for borrowers who have a deposit of at least 25 per cent of the . value of their home. A typical three-year fixed rate for . someone with a 25 per cent deposit costs 2.59 per cent, giving monthly . repayments on a typical £150,000 loan of £680. But someone with a 5 per cent deposit . would have to pay a rate of 6.19 per cent and repayments of £984, . making this deal £3,684 more expensive over just one year. These steep costs are putting off . first time buyers and, increasingly, those already on the ladder who . want to move to a bigger property. A housing boom gives a huge boost to . the economy. Not only does it increase consumer confidence, but those . moving home add to the tax take by paying stamp duty, and spend on . removals firms, decorators, furniture and DIY materials. Immediately after the Budget, the share prices of developers soared by as much as 7 per cent. But a spokesman for Priced Out, which campaigns for more affordable . housing, said the scheme will ‘push house prices even higher and will . help create a bigger housing crisis in a few years’ time’. David Orr, of the National Housing Federation, said: ‘If we don’t tackle . the fact we’re still not building enough homes, we’ll just create . another housing bubble that will continue to push house prices up and . out of reach of the majority.’ Can I buy a house using Help to Buy? If you have a 5% deposit and want to buy a new build home, you’ll be able to access the Help to Buy: equity loan scheme from 1 April 2013. If you want to buy a property which is either new build or an existing property, the Help to Buy: mortgage guarantee will be available from January 2014. What if I don’t have a deposit – can I still get a mortgage? To access a Help to Buy product, buyers will need a minimum 5% deposit. Am I guaranteed to get a mortgage? Are there any criteria I need to meet? For both schemes, borrowers will need to meet appropriate tests to ensure they can pay back the mortgage, as well passing their chosen lender’s credit and affordability checks. How much can I borrow? Subject to meeting the eligibility criteria and affordability checks, you’ll be able to use either Help to Buy scheme to purchase a property with a value up to £600,000. Can existing homeowners access the scheme? Yes. Both schemes are available to home movers as well as first-time-buyers, subject to meeting the relevant eligibility criteria. Can I get an interest only mortgage using Help to Buy? Help to Buy is only available on capital repayment mortgages. Can I buy a property using Help to Buy and rent it out? Help to Buy will only be available on properties which are occupied by the individual or individuals taking out the mortgage. How do I go about accessing these schemes? Help to Buy: equity loan will be available from 1 April 2013. Buyers will be able to access this through participating housebuilders and HomeBuy agents. Help to Buy: mortgage guarantee will be available from January 2014. The Government will provide further details about the scheme later in the year. Will the Government be guaranteeing my mortgage payments for me? No. The Government will provide guarantees to lenders on a proportion of the mortgage. If a borrower’s property is repossessed, the Government will cover a proportion of the losses suffered by lenders.
Families with 5% deposit will get 20% extra from government .
People who earn enough to afford repayments will get deal underwritten .
Return of 95% mortgage accused of stoking economic downturn .
Osborne accused of inflating prices and synthetically ‘propping up’ market .
But Treasury says move will boost housebuilding and help 500,000 people .
Public land to be sold off to be used for new housing estates .
Campaign groups fear greenfield land will be concreted over by developers .
A state-backed mortgage guarantee scheme worth £130billion will see the market flooded with 500,000 cheap loans. The Government is to subsidise deposits and provide state backing for loans to help homebuyers get on the property ladder or move up. But there were warnings that the scheme risks creating a house price bubble. Scroll down for video . Dangerous? Critics fear that offering government-back mortgages to people who cannot afford a deposit could fuel a new property crisis . The Help to Buy scheme will offer . loans to top up the deposits of those buying newly built properties . worth up to £600,000 who can only put up 5 per cent of the loan . themselves. The Treasury will add an extra 20 per . cent of the house value to enable them to get a mortgage. The first . five years of the loan will be interest free. After that it will attract . a 1.75 per cent payment, which will rise annually by inflation plus 1 . per cent. Chancellor George Osborne is expected to unveil more help for homebuyers and extra investment in housebuilding . Borrowers will be able to apply from . April 1 and be able to repay the loan at any point. This part of the . scheme is worth £3.5billion. The second, bigger, part – available . from next January – will guarantee £130billion of mortgages on any . property, not just newbuild, worth up to £600,000. The scheme will be available for mortgages of between 80 per cent and 95 per cent of the home value. So for someone able to muster a 5 per . cent deposit, the Government would put in 15 per cent, to enable the . homebuyer to access an 80 per cent mortgage loan. If a borrower’s property is repossessed, the Government will bear a proportion of the losses, with the lender taking the rest. The Treasury says all major lenders have agreed to take part in the scheme. On top of this, the Chancellor . announced that more Funding for Lending cash may be made available to . the banks, which could also push rates down lower. Changes to the Bank of England’s . remit, meanwhile, could allow it to give guarantees to borrowers that . interest rates would be low for years to come. Last night Chief Secretary to the . Treasury Danny Alexander refused to say what would happen if property . prices collapse, though he admitted there were ‘risks’ with the scheme. ‘What we are doing is supporting . housebuilders to build more homes, support those hundreds of thousands . of people who can afford mortgage repayments to buy a home but not the . deposit,’ he said. Example: The proposed scheme is split into two separate streams, the first (above) for buyers purchasing new build homes and the second (below) for everyone else . The scheme, which will run for three years, can only be extended if the Bank of England agrees. Ashley Hollinshead, of accountants . Deloitte, said: ‘This move is interesting as for the first time it . attacks every level of the housing ladder, from first-time buyers to . those moving in to a bigger family home. ‘The guarantee could prove extremely effective as it will provide banks with confidence that is desperately needed.’ David Hollingworth, of brokers London . & Country, said: ‘If you are looking to buy a house then there . really could not have been a bigger carrot waved by the Government.’ Changes: The government offered more backing for housebuilding, after figures from the Office for National Statistics showed a sharp drop in output from the construction industry . Sea change: Ministers believe cash-strapped second-steppers are holding up the housing market, and making it harder for first-time buyers to get on to the property ladder . In the last housing boom more than . four million mortgages were taken out every year – but this slumped to . little over a million last year. Latest figures from the Council of . Mortgage Lenders show that roughly two in every three loans taken out . are for borrowers who have a deposit of at least 25 per cent of the . value of their home. A typical three-year fixed rate for . someone with a 25 per cent deposit costs 2.59 per cent, giving monthly . repayments on a typical £150,000 loan of £680. But someone with a 5 per cent deposit . would have to pay a rate of 6.19 per cent and repayments of £984, . making this deal £3,684 more expensive over just one year. These steep costs are putting off . first time buyers and, increasingly, those already on the ladder who . want to move to a bigger property. A housing boom gives a huge boost to . the economy. Not only does it increase consumer confidence, but those . moving home add to the tax take by paying stamp duty, and spend on . removals firms, decorators, furniture and DIY materials. Immediately after the Budget, the share prices of developers soared by as much as 7 per cent. But a spokesman for Priced Out, which campaigns for more affordable . housing, said the scheme will ‘push house prices even higher and will . help create a bigger housing crisis in a few years’ time’. David Orr, of the National Housing Federation, said: ‘If we don’t tackle . the fact we’re still not building enough homes, we’ll just create . another housing bubble that will continue to push house prices up and . out of reach of the majority.’ Can I buy a house using Help to Buy? If you have a 5% deposit and want to buy a new build home, you’ll be able to access the Help to Buy: equity loan scheme from 1 April 2013. If you want to buy a property which is either new build or an existing property, the Help to Buy: mortgage guarantee will be available from January 2014. What if I don’t have a deposit – can I still get a mortgage? To access a Help to Buy product, buyers will need a minimum 5% deposit. Am I guaranteed to get a mortgage? Are there any criteria I need to meet? For both schemes, borrowers will need to meet appropriate tests to ensure they can pay back the mortgage, as well passing their chosen lender’s credit and affordability checks. How much can I borrow? Subject to meeting the eligibility criteria and affordability checks, you’ll be able to use either Help to Buy scheme to purchase a property with a value up to £600,000. Can existing homeowners access the scheme? Yes. Both schemes are available to home movers as well as first-time-buyers, subject to meeting the relevant eligibility criteria. Can I get an interest only mortgage using Help to Buy? Help to Buy is only available on capital repayment mortgages. Can I buy a property using Help to Buy and rent it out? Help to Buy will only be available on properties which are occupied by the individual or individuals taking out the mortgage. How do I go about accessing these schemes? Help to Buy: equity loan will be available from 1 April 2013. Buyers will be able to access this through participating housebuilders and HomeBuy agents. Help to Buy: mortgage guarantee will be available from January 2014. The Government will provide further details about the scheme later in the year. Will the Government be guaranteeing my mortgage payments for me? No. The Government will provide guarantees to lenders on a proportion of the mortgage. If a borrower’s property is repossessed, the Government will cover a proportion of the losses suffered by lenders.
loans to help homebuyers get on the property 20 per . cent of the house value to enable them more help for homebuyers and extra investment in housebuilding . Borrowers will be able to apply and 95 per cent of the home value. So for someone Treasury says all major lenders have agreed to hundreds of thousands . of people who can afford government offered more backing for are holding up the housing market, and making it But someone with a 5 per cent deposit . would repayments of £984, . making this deal £3,684 the Budget, the share prices of developers soared mortgage guarantee will be available from January proportion of the losses suffered by lenders.