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UK chancellor Jeremy Hunt is planning new measures to support people buying their first home, as high interest rates continue to pose a challenge to those trying to get on the property ladder.
One option being discussed is an extension to the existing mortgage guarantee scheme that helps homebuyers purchase their first property with just a 5 per cent deposit, according to a person familiar with the plans.
The scheme, introduced during the pandemic by then-chancellor Rishi Sunak, applies to properties worth up to £600,000. It encourages lenders to offer low-deposit mortgages as the state underwrites some of the risk.
The mortgage guarantee scheme was due to end in December but may be extended for a further year at next month’s Autumn Statement as part of a wider package first reported by The Sunday Times newspaper.
The Bank of England held interest rates at 5.25 per cent in September after a series of rises that have driven mortgage rates to 6 per cent for a five-year fixed-rate product and 6.5 per cent for a two-year fix.
Lenders have also cut the number of products available for buyers with small deposits, worsening options for first-time buyers and giving an advantage for cash buyers who do not need to borrow.
Hunt is also examining ways to help buyers save for a deposit through improvements to existing ISA products or introducing new tax-free savings options, the person familiar with the plans said.
Some ISA products, including the Help to Buy and Lifetime ISAs, allow savers to put aside money that can be used to purchase a house, provided the house does not exceed a certain value.
The Help to Buy scheme, which closed in March, gave prospective buyers a 25 per cent government bonus as long as the house cost no more than £450,000 in London and £250,000 in the rest of England.
The Lifetime Isa, which still exists, lets people use their savings to buy a house without incurring tax charges but has the property price cap set at £450,000 across the country.
Hunt is looking at increasing the property price cap on the existing range of Isa products, and potentially introducing a new Isa product for first-time buyers following the closure of the Help to Buy scheme.
Whether this new package of measures to help first-time buyers is introduced will depend on the state of public finances and the economic outlook over the next few months, the person said.
Meanwhile, a spokesperson for Hunt denied reports the chancellor was planning to stand down before the next general election to avoid a “Portillo moment” should he lose his seat in a landslide victory for Labour.
Michael Portillo, then defence secretary, was famously ousted when Labour returned to power in 1997 under Sir Tony Blair.
Hunt holds an 8,800 majority in South West Surrey, but would be standing in a new constituency at the next election owing to electoral boundary changes.
A spokesman for the chancellor said: “Jeremy Hunt will stand as the Conservative party candidate for Godalming and Ash at the next general election.”
