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Shares in FTSE 100 housebuilders leap as mortgage guarantee scheme set to be announced in Budget

Joanna Bourke
·2-min read
<p>Home buyers are expected to benefit from a new mortgage guarantee scheme</p> (Daniel Leal-Olivas/PA)

Home buyers are expected to benefit from a new mortgage guarantee scheme

(Daniel Leal-Olivas/PA)

More than £1 billion was added to the collective value of some of Britain’s biggest housebuilders on Monday morning, as the residential sector looks set for a big boost from measures in this week’s Budget.

Shares in Barratt, Berkeley, Persimmon and Taylor Wimpey made gains of between 4% and 7%, with investors looking ahead to what Chancellor Rishi Sunak will announce on Wednesday.

There are already reports the stamp duty holiday could be extended. On top of that, Sunak is set to outline a new mortgage guarantee scheme to help buyers with a 5% deposit get on the property ladder.

It will help those looking to buy a house of up to £600,000.

The government will offer lenders the guarantee they need to provide mortgages that cover the other 95%.

The scheme will be available to lenders from April, and is designed to increase the appetite of mortgage lenders to offer high loan-to-value lending to creditworthy customers across the UK.

Neil Wilson, chief market analyst for Markets.com, said more than £1 billion was added to the value of four blue chip builders this morning. He said the 95% deals should be “a big boon" for housebuilders.

A number of housebuilders welcomed the plans, but also pointed out they would like to see more planning reforms to encourage more development.

David Woolman, director of residential developer Woolbro Group, said the move will be a “welcome addition of support”. He added: “Even more so in London, where average house prices are higher and much larger deposits are needed for first-time buyers. The new initiative will increase affordability across the whole market for many potential homebuyers.”

But he added “major planning reforms” are also needed to get more developers building more.

Marc Vlessing at Pocket Living said: “The government is right to take action to keep the market moving but this is no replacement for more fundamental changes to the planning system aimed at unlocking more land for new affordable housing.”

Stephen Wicks, chief executive of Inland Homes, said: “The introduction of support for 95% mortgages is welcome in principle, but the danger is that this could continue to fuel an ‘artificial buoyancy’ in the housing market that is not sustainable in the longer term and even a modest downturn in the market could leave buyers in negative equity territory.”

He also said the government needs to invest in planning reforms.

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