Housing round up: Government launch NewBuy mortgage scheme, Interest Only mortgage “time bomb”


Housing & mortgage round upThis week saw the launch of the government’s NewBuy mortgage scheme to help people get onto the housing ladder. The launch came in the same week that a survey showed rental prices were falling and the FSA warned of an Interest Only mortgage “time bomb”.

NewBuy mortgage scheme launched

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The government officially launched the NewBuy mortgage scheme this week.

The scheme is designed to help people with a small deposit, of between 5% – 10% get on the housing ladder; it is hoped that first time buyers in particular will be assisted by the scheme.

The NewBuy scheme will see property developers and the government guarantee mortgages, with the guarantees being paid for by a levy paid by developers.

The scheme is only available in England and the property must be a new development valued up to £500,000.

So far Nationwide, Natwest and Barclays have all launched NewBuy mortgages and it is hoped other lenders will also offer the scheme.

Earlier in the week we published an article covering all you need to know about the NewBuy mortgage scheme, read it by clicking here.

Mortgage “time bomb” for the over 50’s

The FSA (Financial Services Authority) has voiced concerns that Britain’s over 50’s are facing a mortgage time bomb with no way to repay their interest only mortgage.

Speaking to the Treasury Select Committee Martin Wheatley, a Director of the FSA, said there was a“”ticking time bomb that has been created over the last twenty years and what we are trying to do is make sure that time bomb does not get any worse.”

Mr Wheatley admitted he did not know how to solve the problem but that tighter regulation would prevent the situation from occurring again.

In its Mortgage Market Survey published last year the FSA estimated that £120 billion of interest only mortgages are due for repayment over the next 10 years and that the industry faced a “significant challenge” dealing with the problem.

Traditionally Interest Only mortgages have been backed by investment vehicles such as Endowments or ISAs (Individual Savings Accounts) but over recent years many of these have been cashed in leaving the borrower with no way of repaying the debt and facing a retirement where mortgage interest payments still need to be met.

Rental prices ease in February

LSL Property Services have released figures to show that inflation eased in February.

LSL survey 18,000 properties in the UK each month and saw rents fall by 0.6% in February; taking the monthly rent on the average UK home to £707.

The annual rate of rental inflation has fallen from 4.3% in January to 3.5% last month.

Property experts believe that the fall is due to an increase in the number of people deciding to buy a property rather than renting, which could be a sign that mortgage lending criteria is easing.

David Newnes, a director of LSL, said: “In February, an increased number of tenants either became owner occupiers or seriously considered property purchase, rather than renewing their contract or seeking a different rental property.”

He continued: “With fewer tenants than usual actively competing for properties, combined with a slight improvement in the number of rental properties becoming available, many landlords priced less aggressively to avoid the prospect of a void period.”

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