The Government’s NewBuy 95% mortgage scheme duly launched on Monday, with just three lenders participating.
They are NatWest, Barclays and Nationwide. Santander and Halifax said they would be joining the scheme once they have products ready.
Grenville Turner, chief executive of Countrywide, the UK’s largest estate agency and mortgage broker, said: “With only three lenders signed up to the scheme at present, we hope the funding is in place to cope with the pent-up demand in the market and that there are tight controls over how NewBuy mortgage products are priced.”
He added: “NewBuy is not a sticking plaster to replace the void in house sales that will be left by the Stamp Duty holiday.
“While we are supportive of NewBuy as a vital tool to kick-start the new-build market, NewBuy lacks any provision to assist home owners with limited equity trying to sell, which we hope the Government will address in next week’s Budget.” His colleague at Countrywide, Nigel Stockton, in charge of financial services, described the current NewBuy mortgage rates as 'disappointing' and said the success of the scheme would depend very much on the role of part-exchange.
He said that this point was still the subject of behind-the-scenes debate, with lenders and builders trying to reach a solution.
Of the three NewBuy lenders, NatWest has the lowest priced deals, offering a two-year fixed rate up to 95% LTV at 4.29% plus a five-year fixed rate up to 95% LTV at 4.99%, both with a fee of £499.
Barclays has a two-year fixed rate mortgage at 4.99% and a four-year fixed rate at 5.89%, both with a £499 application fee. Barclays said that a typical first-time buyer purchasing at £180,000 and requiring a mortgage of £171,000 would pay £998.65 per month on a 25-year repayment basis when taking out its two-year fixed deal at 4.99%.
Nationwide has a three-year fixed rate mortgage at 5.69% and a five-year fixed rate at 5.99%, both with a £900 product fee and £99 booking fee. Alternatively, fee-free options are available at 5.99% for the three-year fixed and 6.19% for the five-year fixed.
All three will offer mortgages on properties built by Barratt, Bellway, Bovis, Persimmon, Redrow and Taylor Wimpey, while NatWest will additionally offer deals on Linden Homes properties.
Crest Nicholson and Miller Homes will have agreements with lenders in place imminently.
The Home Builders Federation said that 130 builders of all sizes had registered their interest in participating. It said that altogether there had been over 28,000 expressions of interest in NewBuy from prospective purchasers.
Mark Clare, chief executive of Barratt Developments, said: “This is potentially a real boost for home buyers who have been locked out of the housing market by the high level of deposits required to buy a home.”
“Nearly 20,000 potential homebuyers from all around England have pre-registered their interest on the company’s website, with the weekly registration rate now hitting 1,500.'
“The key thing is that people will no longer need deposits of up to 20%, which gives credit-worthy buyers the best opportunity for five years to get on the housing ladder.
“This is also a great way to get the economy moving whilst tackling the housing shortage. We know that building homes creates local jobs, so it’s good news for everyone in the industry.”
Mike Farley, group chief executive of Persimmon, said: “The launch of NewBuy by the Home Builders Federation, lenders and Government is hugely significant as it removes the obstacle of a large deposit which has been a key factor holding back the housing market in recent years.
“NewBuy opens up a 95% mortgage product to both first-time buyers and those looking to move up the property ladder. Importantly, it has no salary cap and is available to purchasers of new homes up to the value of £500,000.
“Initial rates from the large high street lenders to support this product look very favourable, making NewBuy an attractive mortgage option for buyers of new-build homes.
“NewBuy is a much-needed shot in the arm for the whole housing sector and – with research showing every new home built creates five jobs – the Government’s provision of up to 100,000 NewBuy mortgages will also give a welcome boost to UK growth and employment.”
The Council of Mortgage Lenders underlined that NewBuy borrowers will be chosen carefully. It said: “While lenders will assess affordability as carefully as usual, those who are good credit risks should find that the scheme can support their aspirations for home ownership.
“As with all high loan-to-value loans, borrowers need to understand the implications of having a low level of equity.”
Under NewBuy, house builders and the Government have committed to cover a limited amount of any future losses. The house builder will ring-fence 3.5% from the sale and the Government 5.5%. The resulting fund will be used to compensate lenders if they have to repossess the home and sell it for less than the mortgage value. The scheme is available on new homes up to the value of £500,000.
It has not proved popular with everyone. Estate agent Kevin Hollinrake, managing director of Hunters Property Group, said: “It is disappointing that this new scheme, as with other similar initiatives, is only aimed at new homes, rather than the remaining 90% of people who want to sell or buy a home in the resale market.
“The Government has quite rightly identified that raising the deposit is the biggest barrier to entry for those wishing to enter the housing market, yet at the same time they are reintroducing Stamp Duty on properties between £125,000 and 250,000 for first-time buyers. The Government is giving with one hand and taking away with the other.”
A similar scheme, to be called MI New Home, will launch in Scotland.
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Comments
@rant
Ive said before that good EA’s are involved in all parts of property, lettings, repo sales, surveys and so on so do remember that many EA’s will benefit as they will often be the agent for the builder and often they will also potentially be the mortgage broker
……………of course that’s if it works which it wont, obviously
Jonnie
@Steve
But it is for new build and there just aint enough of those to make it happen.
The resi market it far wider than the new build market, don't know the %age difference but I bet a pound to a pinch of salt this wonderful scheme does zip for the resale market and if anything it will make a difference in the wrong direction limited though it will be.
This is just a sham and to buy into the new market is more costly as second hand houses are cheaper.
Builders who can't sell their pricey newbuild shoeboxes asked for and got government help...
Banks who lent recklessly into the mortgage market got taxpayer bailouts...
300,000 families behind with their mortgages are getting handouts through the SMI scheme...
Perhaps EAs who lose business because of this scheme might consider lobbying for a subsidy or two? Alternatively, just hang on until the entire housing market is nationalised and funded by infinte amounts of printed money. Can't be too long to wait for that to happen...
Shut it, please can you explain to me why it is good idea, because I cant see how it helps anyone except the housebuilders.
of course EA don't agree. where will their fat commission be? shut up you , who drive the market price up to make your targets. it;s a good idea and try and get your money from elsewhere
Hawkeye, the scheme is for FTBs AND for those who already have a house and looking to move.
Who can afford a 1/2 mil house as a FTB? Must be very lucky or went to the bank of mum and dad , stole the money or inherited it. What a waste of time this stupid scheme is. Who saw that twit GS on the telly blatently stating this will help? What a load pf bull.
As I said in my other posts today we're all doomed I tell ye we're all doomed!!!!!!!!!!!!!!!!!!!!!!!!!!