12 Mar 2012

Mortgage scheme boost for home buyers

A scheme designed to help homebuyers climb onto the property ladder is being launched in England.

Mortgage scheme aimed at home buyers (Getty)

The government initiative is part of a package of measures unveiled last year aimed at kick-starting the flagging housing market, as well as boosting the construction industry.

The NewBuy Guarantee scheme is forecast to help up to 100,000 people buy a new-build home with a deposit of 5 per cent or 10 per cent rather than the 20 per cent typically demanded by lenders.

It was initially intended to help the first-time buyer portion of the market which shrank back to a three-year low last autumn, but the government has widened the scheme to include home movers.

NewBuy has been masterminded by the Home Builders Federation and the Council of Mortgage Lenders but it remains unclear how many lenders are ready to offer products.

Lenders’ support is vital to the success of the scheme and fears have also been raised that rising mortgage rates could put would-be buyers off the initiative.

Developers would contribute 3.5 per cent of the purchase price while the government guarantees 5.5 per cent. The scheme is available on flats and houses up to a maximum value of £500,000 in England only.

Read more: 'Scandal' of nearly 1 million empty UK homes

‘Not going to change housing market’

Those behind the initiative believe lenders will see it as less risky as it is backed by an insurance scheme contributed to by the building industry and government.

But one banking source said last week that some lenders will need more time to get to grips with the idea.

“It’s not a scheme that’s going to change the housing market,” the source said.

“It’s there to support housebuilders, not necessarily to support home buyers as a priority.”

The source doubted that the scheme would help those with a poor credit history get on the property ladder as buyers would be subject to the same standard of checks as they are with mortgages generally.

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