Taxpayer to bear mortgage risks of first-time buyers

Taxpayers will underwrite mortgages totalling hundreds of millions of pounds under government plans to "unblock" the housing market and revive the flagging economy.

Prime minister David Cameron and his deputy, Nick Clegg, will unveil proposals to help first-time buyers of new homes by carrying part of the risk of their mortgages, according to the Daily Telegraph.

The mortgage guarantee, the first time such a scheme has been attempted in the UK, will result in lenders providing loans with significantly lower deposits than the 20% or more that is typically demanded.

Taxpayers could be liable for losses in the event that a home is repossessed, however.

The government also propose subsidising the construction of 16,000 homes by giving £400m of taxpayers' money to property developers.

In a further move, ministers are working on a scheme under which billions of pounds of money in pension funds will be used to finance the construction of power stations, wind turbines and roads.

In the foreword to the Coalition's new housing strategy, which is published today, Cameron and Clegg say Britain has been "under-building" for decades and that a "radical and unashamedly ambitious strategy" is needed to shake up the housing market.

The strategy also includes a proposal to double from £26,000 to £52,000 the discount available to council tenants wishing to buy their home.

There are plans to "build for growth", with property companies able to bid for public funding to finish developments that have stalled because of a lack of funding and the government selling thousands of acres of land owned by hospitals, schools and the Ministry of Defence.