Osborne announced the launch as part of his Autumn Statement and aims to use the funds to unblock housing developments on sites in Manchester, Leeds and in other areas across the country.
The move has been welcomed by the industry with housing supply issues having been seen by many as a potential stumbling block to the recovery.
Ben Thompson, managing director Legal & General Mortgage Club, said: “As recognised by the chancellor, further measures aimed at stimulating house building are what the market desperately needs.
“The recent housing starts statistics, showing the strongest numbers for a decade, are encouraging and will feel like welcome relief.
“However, the chronic lack of suitable housing is still a real problem. This constrained supply is the main issue to solve if we are to ensure a stable, balanced and sustainable UK housing market in the future. Ideally house prices would increase broadly in line with inflation and wages.”
Thompson’s comments were echoed by Andrew Doyle, chief executive of Crown Mortgage Management, who agreed that a lack of housing supply is a “major problem” for the nation.
He said: “Today’s announcement from the chancellor to advance £1bn in loans to unblock large housing developments for new homes in Manchester, Leeds and across the country is aimed at stimulating housebuilding given that shortgage of supply is a major problem and this is certainly a step in the right direction.
“Furthermore, he has pledged to expand right-to-buy and increase the housing revenue account cap by £300m to allow councils to borrow more to build new homes.”
But Doyle was less enthusiastic about the government’s recent withdrawal of the Funding for Lending scheme.
He said: “The recent ‘stop, start, stop, start’ tactics from the government has been confusing.
“The Funding for Lending scheme was introduced to stimulate the housing market and now has switched focus to small businesses.
“You can’t just stimulate the market and then drop it. Long-term incentives on the supply side is what’s needed to encourage more housebuilding so demand can be met and will ensure the UK continues to see signs of recovery in the mortgage market.”