In a major speech on the economy, David Cameron said the high average age of a first-time buyer was a rebuke for those who believed in a property-owning democracy.
He told an audience of West Yorkshire engineers: “I am determined that we are going to tackle that. Now, with the help of Funding for Lending, the cost of a two-year, fixed rate, £100,000 mortgage, with a 10% deposit, that is now £1,000 cheaper than when the scheme was launched. It’s now possible to buy a new home, anywhere in the country, with only a 5% deposit and at very low interest rates. That is vital.”
While there would be no return to the days of the 110% mortgage, he said such changes would help to deliver the functioning housing market needed for economic recovery: “As we look ahead to the Budget, we’ll consider where there’s more we can do to build on this area of success.”
NewBuy and “monetary activism” which kept interest rates low were also helping mortgage borrowers, he said.
Cameron addressed the banking system and defended the government’s austerity plan in the wake of the UK’s credit downgrade by ratings agency Moody’s.
The separation of banks’ retail and investment arms would allow the government to sort out failing banks without taxpayers’ money, he said, while the promotion of more competition would make it easier for consumers to change banks.
He described the loss of the UK’s triple A credit rating as “the starkest possible reminder” of the debt problem the country faced: “If we don’t deal with it, interest rates will rise, homes will be repossessed, businesses will go bust, and more and more taxpayers’ money will actually be spent just paying off the interest on our debts.”
Even a 1% rise in mortgage rates would cost the average family £1,000 in extra debt service payments, he added.
Cameron’s speech comes after the Council of Mortgage Lenders highlighted the impact of NewBuy and urged the government to include favourable tax treatment for those buying under the scheme in the March Budget.
Key NewBuy lender Halifax also announced today it had established links with its 50th builder partner to further its own NewBuy lending plans.