Despite coming into some criticism from the press, the government’s much-discussed NewBuy scheme has made a solid start, according to the Council of Mortgage Lenders (CML). Although on its own, the scheme isn’t enough to boost the building sector.
The CML pointed out that the scheme - which has recently been criticised for what has been described as a small number of sales – was only ever realistically going to deliver a modest volume of sales within its infancy.
The CML also highlighted how the NewBuy scheme has gradually gathered momentum and is now attracting more lenders, builders and developers. Increased awareness amongst potential buyers is also reportedly helping it to grow and flourish.
The CML said: “With 1,300 reservations to date, NewBuy is well placed to expand further in this autumn’s home buying season. For individual households capable of sustaining monthly mortgage commitments but unable to afford a deposit, NewBuy provides valuable assistance, and the scheme has already fulfilled some of its key objectives. But it is also important to view it both in the longer term and a broader policy context.”
One of the objectives of NewBuy is to enable those with smaller deposits (as little as 5%) to buy a new home. Builders and the government have made a commitment that cover a limited amount of any future losses lenders would potentially have to bear should borrowers be unable to meet their monthly repayments. Lenders like Halifax and NatWest are participating in the scheme, along with builders such as Barratt Homes and Persimmon. The CML’s comments come at the same time as the Halifax’s announcement that it is to extend its seven-year fixed rate mortgage to all NewBuy customers. There are no product fees and a £500 cash back sweetener.
The CML also highlighted aims, objectives and expectations for the scheme: “At the outset, we said that NewBuy had the potential to fulfil three key objectives for the housing market. After six months, it is clear that the scheme has successfully achieved the first two of them. After only six months, it is still far too early to deliver a verdict on the third broad objective that we identified for NewBuy, an increase in the supply of new housing as builders respond to increased demand, and the creation of more jobs in the construction sector. This can only be an objective for the longer term, and it may be several years before we can judge the scale of the contribution from NewBuy.
But we have never suggested that NewBuy on its own is sufficient to kick-start the building sector.”
Sources: Property Wire, Halifax.