June 20 (Bloomberg) -- Barratt Developments Plc and more than 100 other U.K. homebuilders will help first-time homebuyers get cheaper mortgages through a government-backed lending program.
The 500 million-pound ($809 million) plan will help reduce the size of deposits to about 5 percent of a home’s value, Housing Minister Grant Shapps said in a statement today. The government and homebuilders will each provide interest-free loans equal to 10 percent of a property’s value for five years.
“Over the next two years, this will help as many as 10,000 people in England to get that much-needed deposit together and realize their dreams of owning their own home,” Shapps said in the statement.
Mortgage approvals for first-time buyers have fallen more than 50 percent since 2006, to 194,600 last year, according to Council of Mortgage Lenders’ data. Developers say sales are suffering because of lending curbs that make it easier for first-time buyers to buy existing properties than new ones. Britain faces a housing shortage of about 1 million homes by 2015, with London the hardest hit, according to Savills Plc.
The loans under the government-backed program are limited to households with annual incomes of less than 60,000 pounds.
As well as Barratt, the U.K.’s biggest homebuilder by volume, Persimmon Plc, the third largest company in the industry, and Bovis Homes Plc will also offer homes through the government’s plan. The first homes funded under the plan are expected on the market by September and the loans will be repaid after the owners sell the property.
--Editors: Ross Larsen, Andrew Blackman
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