The government-backed 95% mortgage indemnity scheme originally intended for first-time buyers and those buying cheaper new homes is to be extended to all buyers of new homes costing up to £500,000.
Housing minister Grant Shapps has renamed the scheme NewBuy Guarantee, to be launched officially in March.
Mortgage providers are still working on the fine print of the scheme, which will allow them to offer large mortgages without having to bear all of the risk should the property fall into negative equity and be repossessed, with the mortgage indemnified jointly by developers and taxpayers.
A big unknown is what the size of the take-up could be. Originally, Shapps had said that it would help 100,000 first-time buyers. Widening the scheme to home-movers with up to £500,000 to spend on a new home could entice far more than that number. The only criteria is that the scheme is open to UK buyers, and the properties must be their main residences.
But there are calls for the scheme – to be available on both new-build houses and apartments – to be extended to existing homes, amidst concerns that it will boost the new homes industry at the expense of the secondhand market.
Neither the mainstream housing market nor the private lettings sector earned a mention in Shapps’ latest ministerial statement, which concentrated on the new homes and social housing sectors, together with Right to Buy.
Sean King, CEO of the property network Move with Us, 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.”
In further boosts to the new homes industry, Shapps 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 an earlier speech to local councils and house builders this week, Shapps laid out his stall, saying: “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.”
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Comments
Pbro Agent: 'These schemes can be useful, but they must be extended to all properties to get the market moving properly again.'
Still the delusion persists that all we need is a bit more borrowing to get the market 'back to normal'.
What about the fact that the majority of the next generation cannot afford today's house prices and that, one day, mortgage rates will rise.
Do explain how the market can be got 'moving properly again'
Banker goes into a casino.
Banker:
"I want to put all my money on black"
But I want 95% security that it will come up black.
I want the casino to give me all my money back if it does per chance come up red. I need the casino to pay for the insurance to cover this risk.
Croupier:
Are you and idiot, do you not understand the idea of taking a financial risk to get a potential reward?
Banker:
I don't like risk, I want 100% security that I will win.
Croupier:
That is not real life, not unless you get the government to support you with draconian legislation designed for Norman Barons to fleece their surfs if they don't pay for land stolen from them in the first place and keep the rich in wealth and the poor in hock.
OK, says the banker. I will go back to the mortgage business where I am 100% sure to win, no matter what... I really don't like risk.. goodbye.
"Mortgage providers are still working on the fine print of the scheme, which will allow them to offer large mortgages without having to bear all of the risk should the property fall into negative equity and be repossessed, with the mortgage indemnified jointly by developers and taxpayers."
What the hell do they think they are doing? What risk????
Can anyone tell me who [or what organisations] currently indemnify the loan amount from the mortgage providers?
Now who do you think is demanding these ultra high deposits, the mortgage brokers who by doing so are losing business, or those who currently indemnify them?
Rather than this load of tosh, why don't the govt set up its own mortgage company, or make RBS do so, and give loans to FTBs @ 5% deposit. I would be more than happy for my taxes to be used to indemnify those loans.
At present:
"Mortgage indemnity is insurance which your lender may take out for its protection in case, at some future stage, you fall significantly behind with your mortgage payments and your lender has to repossess your property and sell it. If the property is sold for less than the amount of your outstanding mortgage, your lender can claim on the mortgage indemnity to recover some (or all) of its loss. The basic security for the mortgage is your property. The mortgage indemnity, therefore, acts as a form of additional security for your lender. It is not, however, additional security for you."
And [what they never tell you]
"A lender can make a claim after it exercises its power of sale (ie when the lender has actually sold the repossessed property) and the price obtained for your property is less than your outstanding mortgage. The difference between the amount the property was sold for and the amount of your outstanding mortgage is called a shortfall. When you take out a mortgage you make a personal promise to repay all of the money you owe under the mortgage. This promise still applies whether your lender has mortgage indemnity arrangements with an insurer or not.
The fact that the lender has made a mortgage indemnity claim does not mean that you do not have to repay the shortfall."
Quotes taken from the council of Mortgage Lenders website.
HSBC Con-Guys thanks for the replies all, I really must keep up!
@rob
Great minds .... and within five seconds of each other.
@Richard
See news archive for Jan 18 for the HSBC story.
@richard
The subject of the HSBC conveyancing panel has been covered by EAT, on Jan 18. Worth looking for – and I agree with your sentiments.
Added by rantnrave on 2011-12-07 12:30:56
100% deposits, not 100% loans. What would happen to UK house prices if it became illegal to buy a property with borrowed money?
No Brian, feel sorry for you.
What was the size of the loan you took out that's left you so bitter. 100%? 110%? 125% special from Northern Rock???
How much negative equity are you in?
EAT How about reporting on the HSBC closed shop carve up where a borrower can only use the Countrywide panel managed solicitors and only pay referrals fees to Countrywide?
This can hardly be in anyone best interests other than those 2 conglomerates??
Guys leave poor old Brit1234 alone, no one likes him, not even his mother, all very sad and nothing better to do than post his left wing drivel on here. You may notice he never makes a constructive argument.
Gents... Ladies... Prefer-not-to-disclosers...
The scheme was originally rolled out mid 2011 as FirstBuy. You got all hot under the collar about it then as well.
You miss the main point. The scheme is JOINTLY funded by Homes & Communities AND the housebuilders. Equal share: equal exposure.
As I have said previously, this scheme would never get off the ground in the second-hand homes market for this reason alone.
Unless, of course, you can all come up with a few thousand vendors willing to chuck 10% of the property value into the pot - THEN you might have something to approach Mr Shapps with...
@Brit1234 on 2012-02-03 10:22:39
I appreciate you comment but must admit that the phrase
"One trick pony comes to my mind" ;0)
Barratt Homes share prices just jumped 11%
no joke
I quite agree that it is 'strange' that we taxpayers (when I say 'we', I mean when I used to earn enough to pay it) have been told by Government that we will be paying to help builders sell more and, worse still, ignoring second-hand sellers facing possession.
I really must check up how many honours have been given to builders donating to my party in the last few years. No sour grapes of course that my Sir Big T (for services to estate agency) never materialised!!
Good thinking by the treasury though - get Jo Public to pay to help builders sell more then collect 3% Stamp Duty on every sale. Have a good day fellow flat-floggers!
Hommer I am happy prices are continuing to fall. My deposit and costs all saved and now I have taken the deposit over 30%.
Missed the boat no, I just avoided getting on a sinking ship instead. ;)
I dunno about that Homer. If he's after a secondhand house and has a bit of cash, Brit might soon be able to pick up bargain.
Who's gonna want some draughty old shithole when they're (we're?) giving out free cash for nice, cozy new ones.
Brit1234 must hate this, as his predictions and dreams of the big crash still haven't come true.
Heres some advice Britty boy, if the crash you were looking for was going to happen, it would have happended by now, you missed the boat my friend.
Happy Renting
RE Ray Evans "Why not all properties and something like FirstBuy?"
1, There isn't enough tax payers money available.
2, Because the Tories are funded by these building companies.
Even if it could be done, a wide spread return to irresponsible lending risking more tax payers money is not the solution. We want lower/normal prices so people can afford to buy again and transactions can pick up.
Using taxpayers money to underwrite new build house purchases seems misguided at best to me. It's nothing more than Government interference in the free market.
Shapps is a windbag. Just another announcement to add to his long list of them. Meanwhile how many new houses are being built?
Down about 10% in the last quater.
@ spartacus on 2012-02-03 09:34:32
@Steve on 2012-02-03 09:25:54
Agreed.
Even the new name NewBuy smacks of developer marketing input. Why not all properties and something like FirstBuy?
Now which building companies contribute to the Tory party funds?
This scheme benefits developers only and will put byers into instant negative equity. I think it is time for a freedom of information request into how much the big builders fund the Tory party and Mr Schapps.
I smell corruption.
I'm sure this scheme will rally help your sale to all you estate agents out there. You must be as pe*d off as priced out first time buyers.
Seems to me that this guarantees negative equity on new build. Low deposit = high demand = higher price. When you come to sell: high deposit + high resale price to cover mortgage = low demand = falling price = negative equity. The scheme must e applied to all properties to make any economic sense.
Why is it just limited to new builds? These schemes can be useful, but they must be extended to all properties to get the market moving properly again.
Steve, you are right... However, they want to get sales moving of the large stock of new builds on the country's books...
They have no moral interests, purely financial, there's our Govt. again!!!
sounds like a Taylor Wimpy, Shapps and Barratt spit roast to me.
Shapps loves it BTW.
They really are dumb! Don't the Government realise that when you buy a new home you pay over the odds to get it, compared to a similar second hand property! Where is the safety in that? The scheme should be for first time buyers buying any property not just new homes!
To an outsider looking in (I'm a letting agent not an estate agent) this sounds like a very small step in the right direction.
I'll watch with interest to see what the estate agents themselves think.
Yay!
I'm soooo happy!
:-D
That's going to make ALL the difference.
Wooo Hooo