15 March 2012 by

THE NEWBUY GUARANTEE, Government Gimmick or a Helping Hand for Homebuyers?

For the last few years, competitively priced mortgages have only been available to those buyers with a 10% to 20% deposit. This has made it very difficulty for many first time buyers to get finance which in turn has led to a lack of demand for those further up the ladder.

The Government announced this week a new scheme that they claim ‘will unlock the aspirations of a new generation of homebuyers and get Britain building thousands of new homes’.

The NewBuy Guarantee is an initiative which brings together lenders, builders and the Government. It is designed to offer competitively priced, 95% mortgages on new-build properties, thereby assisting those homebuyers with relatively small deposits.

To qualify for the scheme a purchaser must satisfy the eligibility criteria. The criteria are as follows:

  • The scheme is only available to purchasers of new build houses or flats, priced up to £500,000.00 i.e. those buying a flat in a converted property will not qualify.
  • Purchasers may be first-time buyers or those already on the property ladder.
  • Purchasers must be UK citizens or those with a right to remain indefinitely in the country.
  • The scheme is only open to those purchasing their principal home i.e. it is not available for buy-to-let properties and holiday homes.
  • The scheme is not available for shared ownership or shared equity purchases.
    From this week three of the main lenders have signed up to the scheme. The deals that are currently being offered by the participating mortgage lenders are:
  • Barclays will offer a 95% loan to value mortgage on properties built by Barratt, Bellway, Bovis, Persimmon, Redrow and Taylor Wimpey at either a fixed rate of 4.99% for 2 years or a fixed rate of 5.89% for 4 years.
  • Nationwide will offer a 95% loan to value mortgage on properties built by Barratt, Bovis, Bellway, Persimmon, Redrow and Taylor Wimpey at either a fixed rated of 5.69% for 3 years or a fixed rate of 5.99% for 5 years.
  • NatWest will offer a 95% loan to value mortgage on properties built by Barratt, Bellway, Bovis, Linden Homes, Persimmon, Redrow and Taylor Wimpey at either a fixed rate of 4.29% for 2 years or a fixed rate of 4.99% for 5 years.

Halifax and Santander have also expressed interest coming on board later this year.

The housing companies in the scheme cover 85% of the market share and it is hoped that other housing companies will join the scheme shortly.

The developers taking part in the scheme will contribute a portion of the sale price of their properties towards underwriting the scheme. The Government will in turn also guarantee a proportion of the loan.

The Government hopes that the scheme will kick start demand for new homes, creating jobs in the constructions industry as well as growth in the property market.

Critics, however, fear that it will lead to young homebuyers saddling themselves with more debt than they can afford and may ultimately leave them in negative equity if house prices fall. Cynics, meanwhile, believe that the scheme is a gimmick that will help the construction industry rather than homebuyers.

For any advice on buying and selling your home, please contact Diana Lassey at dianalassey@boltburdon.co.uk

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Hot Data

Last month, the European Commission published long-awaited proposals to modernise and harmonise data protection laws throughout the European Union (EU), which will ultimately see the introduction of regulations to replace Directive 95/46/EC - implemented in the UK as the Data Protection Act 1998 - with a view to vastly reducing the number of different interpretations adopted by the individual EU Member States in applying data protection law.

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