Details of two ambitious schemes that are aimed at unlocking the aspirations of a new generation of home buyers, and get Britain building thousands of new homes, were unveiled today by Prime Minister David Cameron and Housing Minister Grant Shapps.
Mr Shapps declared the NewBuy Guarantee open for business – a scheme that will enable an estimated 100,000 prospective and existing homeowners to buy their dream home with much smaller deposits than currently required.
At the same time, the Minister announced details of the reinvigorated Right to Buy, which will give up to two million social tenants the opportunity to buy their council home with a discount of up to £75,000 and, for the first time, ensure that additional properties sold are replaced with new affordable homes for rent.
The NewBuy scheme means that from today, three leading high street lenders and seven of the country’s biggest house builders will begin to offer mortgages on newly-built properties to people with just a five per cent deposit; a financial product not available anywhere else in the market. Other leading names are expected to follow.
Today’s deals will mean that instead of a typical buyer requiring a £40,000 deposit for a £200,000 property, they will now only need £10,000. The government and housebuilders will help provide security for the loan, so if the house is then sold for less than the outstanding mortgage total the lender will be able to recover its loss.
The scheme, which has attracted strong support from many of the country’s biggest house-builders and mortgage lenders, will offer help for up to 100,000 buyers who would otherwise be frozen out of the market.
The deals will include:
- Barclays – who will offer 95 per cent Loan-to-Value mortgages on properties built by Barratt, Bellway, Bovis, Persimmon, Redrow and Taylor Wimpey at just 4.99 per cent fixed rate for two years and 5.89 per cent fixed rate for four years.
- Nationwide – who will offer 95 per cent Loan-to-Value mortgages on properties built by Barratt, Bovis, Bellway, Persimmon, Redrow and Taylor Wimpey at just 5.69 per cent fixed rate for three years and 5.99 fixed rate for five years.
- NatWest – who will offer 95 per cent Loan-to-Value mortgages on properties built by Barratt, Bellway, Bovis, Linden Homes, Persimmon, Redrow and Taylor Wimpey at just 4.29 per cent fixed rate for two years and 4.99 per cent fixed rate for five years.
However, the scheme is not without its critics. Some feel that the scheme is just following the same principles of creating high levels of property based debt that caused the financial crisis in the first place. Others believe it is wrong for the Government and therefore the taxpayer to underwrite mortgages.
Richard Gordon of UKPI said: “The NewBuy scheme could boost home ownership and help kick-start the building industry which would of course be good for Britain’s economy.
“However, I am concerned that it could keep prices of new homes artificially high and drive people back into high levels of borrowing. Banks have been criticised for offering 90% or 95% loans during the boom years and now the UK government is encouraging exactly the same thing again.
“Having said that, mortgages for new homes account for only around 10% of the overall market so the impact on the wider housing market is likely to be fairly limited.”