NewBuy scheme for first-time buyers

The government has launched a mortgage indemnity scheme to help more people get on to the property ladder.

NewBuy will allow people to purchase new-build homes with a deposit of just 5% and the government claims that the scheme will help up to 100,000 people get on the property ladder, while acting as a catalyst for growth in the construction sector.

It offers buyers of new-build houses or flats, worth up to £500,000, a mortgage worth up to 95% of the property purchase price. With such a high LTV rate, the state and the construction company both step in to reduce the risk to the lender.

Under the scheme, the construction company pays 3.5% of the sale price into an account held by the lending bank for seven years. The state also provides a guarantee of 5.5%, but that money will only be used if there is a major property crash.

The scheme is supported by a number of the country’s biggest construction companies, as well as lenders including Barclays and Natwest.

“We welcome the builders and Government sharing the risk to make this initiative possible,” said Moray McDonald, Mortgages Director at Natwest.

“We hope the increased demand it will create will help lift the economy via the construction of additional homes.”

But the scheme has come under fire from some critics, who claim that it is just a way of boosting the construction industry, and does not actually help people in the housing market.

Shelter’s chief executive Campbell Robb said the scheme “does almost nothing to help the growing number of families living in insecure private rented housing with hardly any protection from rogue landlords or unexpected rises in rent.

Posted by: WarrenWilson Categories: Finance Tags: , , 7 Comments

7 Responses to NewBuy scheme for first-time buyers

  1. avatar Steve says:

    It’s not just for first time buyers, anyone looking to move can also take advantage should they need a 90-95% mortgage.

    • avatar alex says:

      i feel house prices are being set above the real time value as backed up by offers often being taken far greater than 10% lower then I take a view that it’s an instant 5% negative equity scheme, a time bomb waiting to happen. unless assistance is given to help people buy at real market value then the market will continue to decline

  2. avatar Adam says:

    This is the same nonesense approach as before. Why must new buyers be limited to “new” properties when there are so many empty properties for sale?

    Under this scheme, first-time buyers not only lose out, it’s also rubbing the noses of those people trying to sell their homes – many of which are also cheaper than new builds!

    I don’t want to live in some backwater miles from anywhere (which is where most of these developments are built) – I want to live in the local area, where my other family members live: where my work is.

    So, a kick in a teeth for home owners trying to sell, and a kick in the teeth for communities with boarded-up and empty houses which nobody can/will buy.

    Really clever thinking that.

  3. avatar alex says:

    With the housing market pricing out of touch with house values and offers being taken at well below advertised price the scheme will be costing more for first time buyers who couldn’t then seek a discount. One of the main issues is second time buyers who cannot get on the second step of the property ladder due to no first time buyers, this scheme will only add to that issue and stagnate the market further. With all the these issues plus the new stamp duty system then i can only see one way for the market to go. I for one will wait for at least another 10% decrease in prices which at this rate will be sooner rather than later.

  4. avatar Mel says:

    How will this help anyone? Lenders will still only lend a certain amount! Doesn’t matter if you can now access a 95% mortgage if you are only earning the national average does it. Unless lenders will lend 6 times peoples salary? ! And then it’s back to silly lending again. Take average 4 times a salary of 20k. That will get you a max mortgage of 80k. House is costing say 200k. Even a 95% mortgage being allowed won’t help you will it!

  5. avatar Sonya says:

    Any scheme that is going to help buyers has to be beneficial to buyers who are struggling to get onto the property ladder. There are very limited 90-95% mortgages even on the market, so this scheme will give less of a challenge to those who could not save larger deposits and get a mortgage before – around 100,000 buyers is quoted as benefiting from this latest scheme. However, I think more does need to be done to improve the availability of mortages as a whole especially for those who can’t buy property in their local areas like Adam has pointed out.

  6. avatar angela says:

    Building construction is the process of adding structure to real property. The vast majority of building construction projects are small renovations, such as addition of a room, or renovation of a bathroom.