Government will also guarantee part of risk of first time buyer mortgages in bid to kickstart housing market

Housebuilders are set to get a boost of £400m as the government unveils a plan to fund 16,000 new homes.

Later today the prime minister will also announce that the government will underwrite part of the risk of first time buyers’ mortgages, allowing them to borrow more and kick start the stagnant property market.

From July next year the £400m fund will see 16,000 extra new homes built and will create 32,000 jobs, the government claims.

The plans form part of the government’s new housing strategy, which will be published later today.

Developers will be able to bid for a share of the £400m fund for projects which are ready to start but lack adequate funding.

Builders have frequently complained of the ability to get finance as the industry is seen as high risk by banks. Plus, last week the Federation of Master Builders produced a report showing there would be a shortfall of 500,000 new homes by 2015 <> if the industry keeps building at its current rate.