More information has been released about the government’s mortgage guarantee scheme.
First trailed last year as part of a package of measures announced by the government, the NewBuy mortgage guarantee scheme, as it is now known, is aimed at kick starting the housing market, which has been subdued for some time.
The housing minister, Grant Shapps, has announced that the NewBuy scheme will:
• Guarantee mortgages up to 95% loan to value for both first time buyers and home movers
• Be available only on new build purchases
• Have a maximum purchase price of £500,000
NewBuy scheme to launch in March
The scheme will be launched in March and will allow lenders to offer loans of up to 95% loan to value, for the purchase of new build properties, without taking on all the risk. A mortgage indemnity fund will step in if the property is repossessed whilst in negative equity to ensure that mortgage lenders will not lose out.
The guarantee will be funded by the government and taxpayer.
The scheme will be open to all buyers, providing they are UK citizens, and is available on new build flats as well as houses, providing it is the applicant’s main home.
Unveiling the scheme Mr Shapps said he wanted to “go the extra mile” to help people get on the housing ladder.
He continued: “The pattern of the past has been to produce endless policies and initiatives that simply gather dust on Whitehall shelves and lead to inaction and inertia.”
“But with the prime minister putting housing centre stage on the road to economic recovery, I am determined we shall not repeat these mistakes of the past.”
First time buyers
It is hoped that the scheme will be particularly helpful to first time buyers, the group probably hardest hit since the credit crunch.
The Prime Minister, David Cameron, has previously suggested that the scheme could help as many as 100,000 first time buyers get on the housing ladder, having been effectively frozen out of the market by tight mortgage lending criteria and the need to produce large deposits.
Home movers have also been hit by tighter lending criteria, with the falls in house prices meaning they often have less equity to use as deposit for their new purchase.
A number of mortgage lenders will participate in the scheme. However, Nationwide, the UK’s largest building society, said yesterday that despite the March launch date it was still ironing out exactly how the scheme would work.
The Council of Mortgage Lenders (CML) also said that when the final details were announced the £500,000 cap could vary across the country.
Yesterday’s announcement was welcomed by housing experts who said that the scheme would increase the number of mortgage options for people with smaller deposits, which will in turn help more people get on the housing ladder and kick start the sluggish market.