A new guarantee scheme being rolled out by the government this month will see 95 per cent mortgages for newly built properties made available to existing and prospective home owners who would otherwise be unable to afford the deposit.
The Newbuy Guarantee scheme is set to help as many as 100,000 people who are struggling to save enough to get an 80 per cent mortgage. Those set to benefit from the scheme will see the required deposit for a £200,000 property fall from £40,000 to just £10,000.
Speaking on Jeff Randall Live, Stewart Baseley, Executive Chairman of the Home Builders Federation defended the scheme against criticisms that it amounts to irresponsible lending; “We’re talking about a return to what I would call traditional lending of the type that a lot of us enjoyed when we were young people trying to get on the housing ladder”
“It won’t be right for everybody, but we do believe it is a critical part of the mortgage package which has been missing from the market the past four or five years.”
Roger Harding, spokesman for housing charity Shelter, said the scheme didn’t go far enough: “This doesn’t feel like the type of bold solution we’re going to need to see supply of homes go up in the future and house prices become more affordable.”
Developers participating in the scheme, including Barratt Homes, will pay a portion of each house’s sale price into a fund, which alongside a further contribution from the Government, will underwrite the scheme.
As well as helping to get people into affordable new homes the coalition is hoping that the scheme will create a large number of jobs for builders. Barclays, Nationwide and Natwest have all indicated willingness to offer mortgages under the terms of the Newbuy Guarantee Scheme, while Santander and Halifax both expect to have products on the market later in the year..