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.

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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.

 

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  • rate this
    -3

    Comment number 352.

    Those saying "wait for the property crash" ignore the fact demand for homes exceeds supply - if people can't buy, they rent, pushing up rental yields. High rental yields makes B2L attractive, which prevents a property crash. In many parts of the UK, buying is actually more affordable than renting, if mortgages are available. This scheme gives more people a chance of getting on the housing ladder

  • rate this
    +1

    Comment number 351.

    A home of your own IS a necessity, even moreso these days when the Government wants to steal every penny you have and stuff it in their pockets. It's not about 'property', it's about human dignity and peace of mind. Do you know how sickening it is to hear your own children talk about the 'Land-lord'? Something has gone very wrong in this country, and it has to be confronted.

  • rate this
    +1

    Comment number 350.

    I don't understand how this will help the situation. Rather than saving for a few extra years and paying a bigger deposit you will be paying a smaller deposit but have a much bigger debt for more years subject to who knows what interest rates. I sympathise with first time buyers having only recently bought our first house with my partner, but the problem is house prices still being inflated.

  • rate this
    +3

    Comment number 349.

    329.jjs

    Agreed completely! The prices are too high and no one wants to budge despite the obviously un-realistic prices.

    Don't get a low money in deal, don't get a part buy scheme and don't use any of these silly government schemes, just wait a bit longer until the stack of cards collapses.

  • rate this
    +5

    Comment number 348.

    Theres a reason banks want a 25% deposit. its to cover their backs because they know they are 25% too much. so if the banks know that houses are not worth what they are selling for, why doesnt the goverment get it.

  • rate this
    +1

    Comment number 347.

    Isn't this artificial support of the supposed and much vaunted "Free" market, how we arrived at the current financially socially culturally and morally corrupt regime?.

    Should help support a few companies share price.

  • rate this
    0

    Comment number 346.

    46yrs. ago I had to save a deposit to buy a house, to get a council house in London at that time was nearly impossible unless you had children, then along came the right to buy and the housing situation got worse because councils stopped building, now the government is reeling it out again, and again giving big discounts to prospective buyers, but still not replacing the housing stock.

  • rate this
    +2

    Comment number 345.

    One way or another, you have to pay for the roof over your head. Negative equity just means you haven't made the profit you thought you deserve.

  • rate this
    +2

    Comment number 344.

    It's good to see that all those massive donations to the Conservative party by the building companies have been remembered.
    Say what you like about the tories, they do look after their own - a lesson Labour might learn one day.

  • rate this
    +1

    Comment number 343.

    And i thought all the home builders Bovis, Taylor Wimpy etc had just posted massive profits??

    But then again i'm sure they need the help more that FTB.

    If you are planning on buying a house, wait until the crash comes and get it cheaper and without being owned by the bank for an overpriced set of bricks and mortar.

  • rate this
    0

    Comment number 342.

    Wondered why the banks/building societies were raising their interest rate, obviously they need to pay for it somehow; off the rest of us.

  • rate this
    +3

    Comment number 341.

    Isn't this just social engineering? Taxpayers money should NOT be used to subsidise people's spending. Isn't it obvious that this just sends up the price of houses, causing more inflation and misery for those trying to save for a home?

    Oh. Wait. This is for NEW houses. Right, so it subsidises the building companies. Silly me.

  • rate this
    +2

    Comment number 340.

    Grant Schwepps...?
    What a ridiculous name......

  • rate this
    +9

    Comment number 339.

    How about stopping all these landlords buying up houses to rent,i mean some have hundreds of houses n others 20-30 houses ,its destroying housing for family`s n pushing up prices. You should only be allowed to own 2-3 houses ,we are only a small island after all.

  • rate this
    -2

    Comment number 338.

    First time buyers are not sub prime; we have to pass strict checks. I have a good job, a good credit history and I saved for 3 years to raise a 5% deposit, but 25% was impossible. My mortgage costs less than flat-sharing with strangers. I never missed a rent payment and I don't expect to default on my mortgage. The gov should help more first time buyers and make renting affordable again

  • rate this
    +2

    Comment number 337.

    "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 Tories and banks will fight absolutely tooth and nail to prevent weatlth - rather than income - being taxed. even though inflated prices and the complete failure of the 'market' to house the UK workforce flexibly and affordably is all around us

  • rate this
    +2

    Comment number 336.

    Who would want to anything like a house with the current state of the economy? Creating jobs for Bob the Builder and friends is not the solution. We need investment in industry to provide jobs based on things we make and hopefully can export. But the banks, and therefore the financial sector, and therefore the nondescripts who pose as politicians, are not really bothered wit such trifle matters.

  • rate this
    +3

    Comment number 335.

    So people cant afford these prices so the goverment is going to help them afford it. so b
    this scheme is to keep the overinflated prices. if people just buy new house we.ll have alot on non new house,s having to drop prices mean the new builds will have to drop which means negative equity for everyone. dont think thats the best.

  • rate this
    +2

    Comment number 334.

    I personally have just bought a house with a 90% LTV, only able to do this because I gave up my social life for years and had a perfect credit history. I think a 5% deposit could already be offered by house builders without the intervention of the government. We need to get rid of the "want it now" attitude. People need to learn to save and realise that owning a house is not a necessity.

  • rate this
    +5

    Comment number 333.

    What a pathetic response from a pathetic government. We have about 4 million people with social housing needs. And Cameron comes out with this. If it was his Rich friends with shortages he would soon act. Toriesnomorals.

 

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