Mortgage scheme offers buyers help up the property ladder

 

Housing Minister Grant Shapps insists the scheme "will really help people get on the housing ladder"

People in England are being offered help to climb onto or up the housing ladder as the government's mortgage indemnity scheme launches.

Building firms and taxpayers will be co-guarantors on new homes bought by existing or first-time buyers.

The government hopes the NewBuy scheme - supported by Barclays, NatWest and Nationwide - will help people to borrow up to 95% of the value of new homes.

Critics argue the scheme is just a ruse to help the construction industry.

Under NewBuy, the builder pays 3.5% of the sale price into a special account held by the lending bank for seven years.

Taxpayers will provide additional guarantees of 5.5% but that money will be called upon only in the event of a major property crash.

The scheme is being unveiled on the same day Prime Minister David Cameron confirmed the extension of the right-to-buy discount to up to £75,000 for social housing tenants.

'Scheme re-boot'

Under that scheme, those who have had five years in a council house could receive a 35% discount, with an extra 1% for each added year up to a maximum of £75,000.

Tenants in flats will get 50% off after five years, with 2% added yearly. The government says the cash raised from the sales will be put towards new "affordable homes for rent".

Mr Cameron said of both schemes: "Strong families and stable communities are built from good homes. That's why I want us to build more homes and I want more people to have the chance to own their own home."

Start Quote

The scheme will also provide a vital kick-start for house builders large and small”

End Quote Stewart Baseley Home Builders' Federation

He said: "We're rebooting the right-to-buy scheme to increase discounts for two million tenants in social housing in England. And we're delivering on our promise to offer affordable mortgages to buyers who might otherwise not be able to raise the money to buy a newly built home."

He added: "It's no good hoping people will climb the property ladder if the bottom rung is missing."

NewBuy is backed by the Home Builders' Federation (HBF) and the Council of Mortgage Lenders and seven construction firms - Barratt, Bellway, Bovis, Linden Homes. Persimmon, Redrow and Taylor Wimpey.

The scheme is available on flats and houses up to a maximum value of £500,000 in England only.

The Department of Communities and Local Government says the NewBuy scheme will enable banks or building societies to lend up to 95% of the sale price - meaning buyers might only have to provide a £10,000 deposit on a newly built £200,000 home.

'Questions to answer'

Housing Minister Grant Shapps said the average age of first-time buyers had risen dramatically as people could not afford deposits.

"I'm not prepared to stand by, and nor is the government, to watch an entire generation of people be locked out of the housing market when they can afford proper mortgages," he said.

Stewart Baseley, executive chairman of the HBF, said: "NewBuy will help thousands of people to meet their aspirations to buy a new home, freeing up the housing market and helping first-time buyers and those unable to take the next step on the ladder.

Start Quote

This strategy also does almost nothing to help the growing number of families living in insecure private rented housing with hardly any protection from rogue landlords or unexpected rises in rent”

End Quote Campbell Robb Shelter chief executive

"The scheme will also provide a vital kick-start for house builders large and small who will be able to build the homes and create the jobs that the country desperately needs."

The construction industry hopes the plan will lead to an extra 100,000 properties being built, which it says would create 500,000 jobs.

For Labour, shadow housing minister Jack Dromey said: "There are questions to answer about this scheme. Why has the number of major lenders participating in the scheme fallen from seven to three and the number of builders from 25 to seven compared with when this scheme was originally announced?

"Reports have also suggested that few, if any, mortgage products will be available straight away and that the interest rates might not be attractive to would-be buyers.

"It would be absolutely wrong for the government to raise the expectations of families and young couples only for them to find little choice and that they're unaffordable."

Property expert Henry Pryor: "Anything that artificially props up house prices stores up trouble for tomorrow".

Other criticisms levelled at NewBuy are that it is just a ruse to help the construction industry and that the government is artificially meddling in the housing market and postponing a future fall in house prices.

And Shelter's chief executive Campbell Robb said: "This strategy also does almost nothing to help the growing number of families living in insecure private rented housing with hardly any protection from rogue landlords or unexpected rises in rent."

Earlier this month the HBF said the number of new homes getting planning permission in England had fallen to a five-year low.

A Council of Mortgage Lenders spokesman said: "There is lender support and interest in the scheme. This is part of a wider approach to stimulating demand in the economy and it is part of a growth package and a series of measures."

One of Britain's biggest housebuilders, Barratt Homes, said 20,000 people had already registered for more information about the scheme.

 

More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    +1

    Comment number 332.

    Why not introduce a tax of 10 percent a year per house on anyone owning 2 or more houses, whether they are for their own use or rented out.
    The building industry needs the price of materials to come down so that it can build decent sized homes at a very reasonable price instead of match boxes that no-one can afford.

  • rate this
    +1

    Comment number 331.

    @ 317. Sue Doughcoup

    I too struggle with that argument.. tenants in germany have rights which tenants in the UK do not. Much harder to evict, much harder to raise rents.

    This scheme will stop UK landlords going into negative equity.

  • rate this
    +6

    Comment number 330.

    The major focus of affordability has been the high deposits required. Just a minute what about

    - the high prices

    - the servicing of that mortgage when interest rates return to sensible levels

  • rate this
    +8

    Comment number 329.

    The problem is that house prices are TOO HIGH.

    Houses are NOT for investment. They are for living in.

    I don't own a house and I will struggle to buy

    What we really need is ahouse price crash and not a scheme to shore up or get around the fact that house prices are theft.

    but then again those in power own property ... and there lies the problem.

  • rate this
    +7

    Comment number 328.

    Great idea. Then these loans could be packaged up in bundles and sold all over the world and then when some of these over stretched borrowers start to default we can all ignore the danger signs and just hide the risk in complicated financial products. Sound familiar....

  • rate this
    +2

    Comment number 327.

    Here we have a market sustained by government interference and all this new measure will do is ensure that when the collapse occurs it will have a much bigger affect.
    All this will do is increase house prices and there for the cost of living, which will require an increase in foreign labour and bigger inability to compete internationally.

  • rate this
    +4

    Comment number 326.

    "My question is what help is the government offering to people who got caught up in the housing market crash? I bought my house in 2007 and paid a 27% deposit. My house is now worth 38% of original purchase price ..."

    Answer - expect nothing. The banks need an awful lot more suckers like you. And the bank fawners here will jeer at you for not reading the small (or big) print

  • rate this
    -6

    Comment number 325.

    I welcome this news and hope that some first time buyers will buy the house I'm selling in Rochdale! The housing market has been absolutely appalling over the last five years and the inablility to sell this house has led to me not being able to move up the property ladder myself.

  • rate this
    0

    Comment number 324.

    Banks have had access to about 1.5 trillion in QE from EU, UK and god knows how much from USA.
    Yet they are still putting up mortgage rates?

  • rate this
    +13

    Comment number 323.

    This scheme just prolongs the type of irresponsible borrowing attitudes that got us into the credit crunch in the first place and is designed purely to prop up estate agents and house builders. House prices in this country are artificially high and should be allowed to fall to a an affordable level naturally. More houses should be built by the state for rental only.

  • rate this
    +5

    Comment number 322.

    314.Megan
    "Nice to see the government proposing something that is to the benefit of ordinary citizens"

    Only people this benefits are bankers and builders. The rest of us lose out as our land is needlessly built on and our taxes go up to maintain housing benefit caused by the prices kept artificially high.

  • rate this
    +2

    Comment number 321.

    The illegal part is Article 14 of the Convention on Human Rights (descrimination) The banks will approve according to balance sheet leaving out small and startup builders, thus leaving established builders,
    benefiting from a powerful marketing tool denied the smaller builders. A mortgage requires a security(the home) and a buyer seller relationship. not a bank builder relationship.

  • rate this
    +6

    Comment number 320.

    "The government hopes the NewBuy scheme - ... - will help people to borrow up to 95% of the value of new homes."

    Wasn't this partly how they got us into this financial mess? Why is the solution always to borrow more?

  • rate this
    +2

    Comment number 319.

    I am always amazed that most "Have Your Say" postings immediately spot the weak spots and spin of the political parties.

    Surely it is the job of the civil servants to do this - or are we just the most sensible people around? Where is it all going so horribly wrong with this government which seems to have no eyes, ears or brains?

  • rate this
    +5

    Comment number 318.

    "Let me guess - you don't own your own house, do you?"

    I do own my own house. I also have a good private sector job and children and frankly both the latter - and the future - are far more important to me than using taxpayers money & hundreds of billions of QE to prop up house prices. And banker salaries.

    Inflated house prices benefit nobody but the Banks. Thats why the Torys are so keen

  • rate this
    +4

    Comment number 317.

    305 Chris London.

    I never could understand that argument, especially over here with such greedy, grasping landlords. Probably OK in Germany where rents, I hear, are a lot lower. But why pay the same rent as a monthly mortgage repayment and after 25 years have your own home and no rent to pay? Seems like a no-brainer to me.

  • rate this
    -7

    Comment number 316.

    This is definately good news for first time buyers. My question is what help is the government offering to people who got caught up in the housing market crash? I bought my house in 2007 and paid a 27% deposit. My house is now worth 38% of original purchase price and I'm stuck on the banks SVR and unable to take advantage of the low interest rates.

  • rate this
    +4

    Comment number 315.

    308.pablofreudianis

    Negative equity is the price to pay for purchasing at the top of the market and paying too much at a bad time. Also remember that if your house price falls so does the next one you want to buy (and the mortgage amount!)

    Someone has to lose out in this situation and the more disgruntled young people get, the more problems will become quickly evident.

  • rate this
    -7

    Comment number 314.

    Nice to see the government proposing something that is to the benefit of ordinary citizens and real businesses (the construction industry) rather than just to the advantage of themselves and their cronies in finance. Dare we hope they've finally realised where their duty of care lies?

  • rate this
    -3

    Comment number 313.

    At first I thought this was bad, but then I considered it and I'm not so sure.
    Our issue is too much debt and over priced housing.
    To reduce mortgages we need to reduce demand or increse supply.
    So how do you encourage builders to build without stoking the market or subsidising?
    Take this scheme and add a requirement that builders build a replacement to qualify and this scheme could work.

 

Page 3 of 19

 

More Politics stories

RSS

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.