New-build 95% mortgage indemnity scheme to extend to all UK buyers

Thursday 2nd February 2012

The mortgage indemnity scheme originally intended for first-time buyers is to be extended to all UK buyers of new homes at up to £500,000.

Housing minister Grant Shapps has renamed the scheme NewBuy Guarantee, to be launched officially in March.

In further boosts to the new homes industry, he announced that he is on target to have enough public land released by 2015 to build 100,000 new homes, and confirmed that he will allocate £45m to help unlock 18 of the most difficult stalled sites in the country to get workers back on site and 1,301 homes built.

The funding forms part of the £420m Get Britain Building fund.
 
In a speech yesterday, Shapps said: “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. But with the Prime Minister putting housing centre stage on the road to economic recovery, I am determined that we shall not repeat these mistakes of the past.

“That’s why I’m pulling out all the stops for those who want to get on the property ladder, so from March the NewBuy Guarantee scheme will be on hand to help people buying newly built properties with just a fraction of the deposit they would normally need.”

He said the NewBuy Guarantee scheme would be open to UK citizens buying new-build houses and flats up to £500,000 as their main home – whether they are first-time buyers or moving up the ladder.

Sean King, CEO of the property network Move with Us, called for the NewBuy Guarantee scheme to be widened to existing housing.

He said: “The NewBuy Guarantee scheme is welcome news for aspiring home owners, significantly reducing the deposit needed to buy their own home by around 75%.

“On a home worth £120,000, buyers would only need a deposit of around £6,000 rather than as much as £24,000. In this case the £18,000 reduction could mean the equivalent of around three years of hard saving for a couple, both earning the average UK wage.
 
“It is a pity that the scheme could not be widened to existing housing as we believe this new initiative from the Government could help those disadvantaged by tougher lending rules realise their dream of moving up the property ladder.

“While it is a positive move, we are waiting for more detail about the eligibility criteria for the 95% loans and we question if this will be wide enough for the Government to reach its target of helping 100,000 families and young people move into home ownership.

“This level of detail and the reliance on new home developers to promote the scheme may actually deter the less committed buyers from applying at all. Clear guidance on eligibility and a promotional push will be needed for the scheme to succeed.”