New Buy Guarantee Scheme Launched

Government Scheme Offers Hope to Those Buying a New Build Property

The Minister for Housing and Local Government, Grant Shapps, has announced a new scheme that aims to spark a recovery in the property market.

Mortgage lending has seen more competition in the first-time buyer market recently, however rates are still high for those with only a small deposit.  For those already on the housing ladder, falling house prices mean that would-be movers are left without the necessary equity to make the next step up the ladder.

Due to be launched in March 2012, the NewBuy Guarantee Scheme is designed to encourage mortgage lenders to offer larger mortgages to those wishing to purchase a new build home. The scheme, previously referred to at the mortgage indemnity scheme, works by enabling both first-time buyers and those already on the housing ladder to buy new build houses or flats with only a 5% deposit.  The remaining 95% of the mortgage loan will be indemnified by the taxpayer and property developer.  Therefore, should a home-owner who has purchased a new build property under the scheme be repossessed, it is the tax payer and the original property developer who will bear the loss and not the mortgage lender.

While the scheme is open to any UK citizen regardless of whether they are a first-time buyer or are already a home-owner it comes with the following conditions:

  • The scheme is limited to 100,000 homes
  • It is for new-build properties only
  • It is applicable only for homes up to the value of £500,000
  • It must be the home-owner’s main home and not be used for investment purposes

Spokeswoman for the Council of Mortgage Lenders, Sue Anderson, said they were looking into the scheme but it was unclear whether lenders would be able to offer cheaper mortgages for those purchasing a house under the scheme.

She went on to say: "While it is easy to ally this scheme with first-time buyers who are struggling to get on the housing ladder, our research shows there are a lot of people who cannot move house because their equity has been eroded. They make up a chunky part of the market."

Commenting on the need for the scheme, Shapps, stated: "The pattern of the past has been to produce endless policies and initiatives that simply gather dust on Whitehall shelves and lead to inaction and inertia," he said. "But with the prime minister putting housing centre stage on the road to economic recovery, I am determined we shall not repeat these mistakes of the past."

The chief executive of property firm Countrywide, Grenville Turner, said: "As deposit affordability continues to be one of the most restrictive barriers to purchasing a property, we are seeing a greater level of competitiveness from lenders in the higher loan-to-value mortgage range, and opening up the restrictions on prospective buyers who can access the NewBuy guarantee scheme can only be a good thing for the market."

For more information on the NewBuy Guarantee Scheme visit: www.communities.gov.uk/news/housing/2079087

For more informaton on the Council of Mortgage Lenders visit: www.cml.org.uk/cml/media

If you are buying a new build property and wish to discuss the NewBuy Guarantee Scheme further telephone Kate Atkinson, Licensed Conveyancer, in our Liverpool office on 0151 928 6544.

 

 

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