The government’s NewBuy mortgage scheme, designed to help people get onto the property ladder, has been launched.
The NewBuy scheme, which is available for both first time buyers and existing home owners, will only be available for people who want to buy new build homes with the scheme guaranteeing mortgages of up to 95% of the value of the property.
The guarantees will be provided by the developer and the government. The developer will put 3.5% of the sale price into an account held by the lender for seven years, the government will put a further 5.5% aside. Government money will only be called upon in the event of significant house price falls.
The NewBuy scheme, which is only being offered in England, will be available on properties worth up to £500,000 and seven builders Barratt, Bellway, Bovis, Linden Homes. Persimmon, Redrow and Taylor Wimpey are currently signed up.
So far three mortgage lenders have signed up to the scheme, Natwest, Barclays and Nationwide; it is expected that more banks and building societies will launch NewBuy mortgages over the next few weeks.
Help for first time buyers
Launching the scheme Housing Minister, Grant Shapps, said: “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.”
Stewart Baseley, Executive Chairman of the Home Builder’s Federation (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.”
He continued: “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.”
It is hoped that the scheme will mean an extra 100,000 homes are bought leading to the creation of around half a million construction jobs.
However, not everyone has welcomed the scheme.
Some property experts believe the scheme will unfairly help property developers and that it could lead to over inflated property prices.
Right to buy
David Cameron also announced today that the maximum discount under the right to buy scheme will be increased to £75,000.
Tenants who want to buy their house under the right to buy scheme will receive a 35% discount after five years with an extra 1% discount for each additional year they have rented the property.
Those tenants living in flats will receive a discount of 50% after five years of renting with an additional 2% for each extra year.
The Prime Minister 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 continued: “It’s no good hoping people will climb the property ladder if the bottom rung is missing.”
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