First-Time Buyer Plan 'May Allow 5% Deposits'

Taxpayers could underwrite millions of pounds worth of mortgages for first-time buyers as part of a plan that may allow deposits to be cut to as little as 5%.

The Government is aiming to "unblock" the housing market and would target people who are currently priced out of getting a foot on the property ladder.

According to The Independent, having the taxpayer underwrite some mortgages would allow deposits for first-time buyers to fall from the current level of 20%.

It comes as the Government unveils a series of proposals designed to tackle a shortage of affordable homes.

Housing minister Grant Shapps confirmed to Sky News there would be a government-backed indemnity scheme.

"People have had to wait until they are perhaps 37 to get a foot on the housing ladder and save up the equivalent of a year's income after tax," he said.

"This scheme brings the industry together, the lenders with the builders, and allows the Government to do that extra little bit to get them across the finishing line in order to ensure people will be able to put down smaller deposits."

Mr Shapps said the money came from budget "underspends" and was not extra cash.

He earlier remarked to the BBC: "What we want to do is make it easier for first-time buyers... who say the biggest problem we have is the amount of deposit that we have to get together - that is their biggest blockage."

Asked about the potential financial pitfalls for the taxpayer, Mr Shapps said public money would not be put at "unreasonable risk".

He added: "The industry itself - the Council of Mortgage Lenders, the homebuilders - they've been working on these types of ideas for a very long time, many, many months, and are actually trying to help themselves.

"What Government can do, of course, is sometimes provide some sort of backstop but actually this is largely going to be an industry-led approach with support from the Government."

He said the money would be "recycled" - it would help developers or first-time buyers before coming back to the public purse to be "used again for something else".

The coalition has also published details of a £400m Get Britain Building scheme, which will aim to help projects put on hold due to a lack of funding.

The Government claims the money will "unlock" the construction of up to 16,000 new homes, supporting 32,000 jobs in the process.

It is estimated that around 3,200 of the properties will be affordable homes.

In the foreword to the Laying The Foundations report, the Prime Minister and Deputy Prime Minister explain: "The housing market is one of the biggest victims of the credit crunch: lenders won't lend, so builders can't build and buyers can't buy."

"That lack of confidence is visible in derelict building sites and endless For Sale signs," David Cameron and Nick Clegg write.

"It is doing huge damage to our economy and our society, so it is right for Government to step in and take bold action to unblock the market."

However, the opposition say the new money is an inadequate replacement for funding for similar projects cut by the coalition.

Shadow housing minister Jack Dromey said: "George Osborne is giving back only 10% of last year's £4bn cut to housing investment to build just 3,200 affordable homes.

"With millions in need of a decent home at a price they can afford, the country is gripped by a growing housing crisis.

"Despite 127 government announcements, more than one a week since the coalition took power, their own figures show a 6% fall in new homes and a 10% increase in homelessness.

"Their housing policies are failing and George Osborne's mismanagement of the economy is making things worse, holding back housebuilding."

:: It comes as the Rightmove House Price Index suggests there has been a 13% fall in the number of new sellers coming to the market, compared with the previous month.

It blames the uncertainty over the future of the eurozone.

Asking prices have also fallen by more than 3% (3.1% ) in a month.