By Kylie MacLellan
LONDON (Reuters) - Britain plans to extend a scheme to encourage house building and develop a new town close to London, Chancellor of the exchequer George Osborne said on Sunday, ahead of a budget announcement this week that will stick closely to his austerity programme.
The government will extend until 2020 its programme of providing equity loans to buyers of newly built homes, adding a further 6 billion pounds to the scheme.
"I want to extend the Help to Buy scheme for newly built houses," Osborne told BBC television. "It was going to end in 2016. We are now going to extend it for the rest of the decade. That would mean 120,000 new homes."
Asked about his budget statement which is due on Wednesday, Osborne stuck to his message that his economic policies were helping the recovery but he reiterated that further difficult decisions about fixing the public finances lay ahead.
Osborne is unlikely to be able to offer much to voters in the budget, little more than a year before the next national election, although he is expected to announce a latest increase in the amount of income exempt from income tax.
The government is seeking to boost construction of homes to help address a shortage that is helping to push up prices.
Under the two-part Help to Buy Scheme, buyers of newly built homes worth up to 600,000 pounds can seek equity loans from the government. It had planned to set aside 3.7 billion pounds for the scheme by 2016.
The equity loans part of Help to Buy differs from the second, more controversial, phase under which the government provides guarantees to encourage lenders to provide mortgages to people who have been frozen out of the property market by the soaring size of deposits required.
The extension of the equity loan part of the scheme will be welcomed by housebuilding firms such as Barratt Developments and Persimmon, which have sold hundreds more of their homes quicker than expected as buyer demand bounced back.
The industry has previously called for more clarity on how the scheme would end.
Osborne also said the government would support the development of Britain's first new so-called garden city, which aim to combine town and country living with affordable housing and green space, in nearly 100 years to help provide more homes for the under pressure south-eastern region.
He said the government would invest 200 million pounds to support the construction of 15,000 new homes on the site at Ebbsfleet, which is on the high-speed rail line linking London with Paris and other cities in Europe.
(Additional reporting by Brenda Goh; Editing by William Schomberg and Alison Williams)