PEOPLE in Southampton will be able to buy a typical first home with a deposit of just £6,500, George Osborne pledged in yesterday’s Budget.

The Chancellor unveiled an eye-catching ‘Help to Buy’ scheme for those unable to find the hefty deposits now demanded by mortgage lenders – helping 215,000 people a year nationwide.

The initiative will allow both first-time buyers and people trying to move up the housing ladder to get a mortgage with a deposit of just five per cent.

In Southampton, where the typical flat costs around £130,000 a buyer would be forced to find just £6,500 – instead of up to £26,000, as currently demanded.

Hailing a “dramatic intervention”, Mr Osborne told MPs: “For anyone who can afford a mortgage but cannot afford a big deposit, our mortgage guarantee will help them to buy their own home.”

Buyers will put down a five per cent deposit on a newly-built home worth up to £600,000, with 20 per cent of the cost funded by a “shared equity” loan, repayable when the home is sold.

Separately, the Government will guarantee £130bn of home loans, to persuade lenders to offer deals with deposits as low as five per cent, on new and existing properties.

But the Treasury was immediately warned it risked creating another “housing bubble” – pushing prices up at the expense of buyers and destabilising the economy.

Ian Wallace, managing director of Barratt Southampton, said the Government’s new plans for first time buyers were a “major boost”. Barratt is behind developments at Hinkler Place and Hollybrook Lodge in Southampton, and Park View in Hedge End.

Mr Wallace said: “Over the last five years high deposits and limited availability of finance have combined to lock many people out of the housing market. This is an important step towards addressing these issues and meeting the housing needs of the nation. It will also be a major boost to the economy – every additional home we build creates two new jobs.

“We are now gearing up to meet the increase in inquiries that we expect to see.”

Brian Dawkins, local director of Field Palmer estate agents in Southampton, said: “Any help for first-time buyers is going to be welcome. That’s still the biggest problem area of the market.

“The market conditions in Southampton are not too bad – there is activity but there are a lot of investors looking and not enough first time buyers.

Bring back 95 per cent mortgages, and then everything will kick on quite well.”

Andrew Furnell, director of Carter Edwards estate agents in London Road, Southampton: “Any buyer incentive or first-time buyer aid which helps the second hand market as well as new build will help. It’s not house prices that need to increase but the transactions to get the economy moving again.”

How it works:

FIRST-TIME buyers will have two options to help them jump on the property ladder.

The first option is the equity loan. First-time buyers will need a minimum five per cent deposit to qualify and the government will loan up to 20 per cent of the value of the property through an equity loan.

That loan can be repaid at any time or when the property is sold.

It means prospective buyers only need to secure up to a 75 per cent mortgage from a bank or
building society.

People buying new build and existing will need a deposit of as little as five per cent for the mortgage guarantee scheme.

A mortgage will need to be secured for the home but the government guarantee will encourage lenders to offer better access to low-deposit mortgages.

The scheme will be available from 2014 and will run for three years.

  • Additional reporting by Rob Merrick