The British government's plan to help reduce down payments for new homes to as low as 5 percent will give a boost to a homebuilding industry that's learned how to survive a slowing economy and four years of stingy credit.

Mortgage lending is less than half the level of 2006, at the end of the housing boom, with buyers now required to pay as much as 25 percent of a home's value up front. The program would lower that by providing a guarantee, shared by the government and builders, to protect lenders from some losses in a default.

U.K. homebuilders have cut costs, changed their products and acquired discounted land over the past two years to improve margins as home sales fell to about half the level of 2006. Profit growth will likely accelerate from the down payment program, said Charlie Campbell, an analyst who follows builders at London-based Liberum Capital.

“If mortgage lending creeps up a bit and new build continues to take share from existing stock, profits will go up quite a lot because the input costs have come down,” Campbell said in a telephone interview. The government measure may lift prices by as much as 3 percent above current estimates and boost homebuilder shares, he said in a note to investors.

Housing construction may rise by 15 percent or more after the measure goes into effect in the second quarter, Taylor Wimpey Plc Chief Executive Officer Pete Redfern said on Jan 17. The same day, the company said it would meet a profit-margin target early after home sales increased 2 percent in 2011.

Eoin Treacy's view While the UK's housing market has not suffered the same price declines as the USA, availability of credit and the economy's low growth trajectory are both challenges. The UK's homebuilding & construction sector has a high degree of commonality with the USA's. Base formation development is now in its third year.

Persimmon yields 1.83% and is currently testing the upper side of its base. It has posted a positive return for each of the last six weeks so the potential for a consolidation has risen. However a sustained move below 460p would be required to check medium-term scope for a successful upward break.

Berkeley Group does not pay a dividend but is the only share in the sector to have completed its base. It found support in the region of the upper side and the 200-day MA in August and continues to hold above the trend mean. A sustained move below 1200p would be required to question potential for continued higher to lateral ranging.