Last year, Grant Shapps announced the coalition government’s new housing strategy. The NewBuy Mortgage Indemntiy Scheme was at the core of the plans and claimed to guarantee loans of ups to £500k. Now, further details of the somewhat controversial scheme have finally been revealed. When it was originally announced, there was scepticism as to whether or not it was a wise move to implement an indemnity product funded by property developers and taxpayers.
The NewBuy Guarantee is primarily (but by no means exclusively) aimed at first time buyers who are unable to save for a 10 or 20% deposit. The new product is supposed to give a boost to the housing market by offering potential homebuyers the opportunity to purchase a new build property with a 5% deposit.
The New Buy Mortgage Guarantee – How it Works...
The coalition government’s scheme will underwrite 95% mortgages for new homes up to the value of £500k. At present, the launch date for the NewBuy Mortgage Guarantee Scheme is March. The idea behind it is to encourage hesitant buyers to take the plunge without quite so much risk.
Home owners are practically guaranteed not to lose money if the new build property they purchase falls prey to the negative equity trap and is subsequently repossessed. This is because the mortgage indemnity scheme is funded by property developers and taxpayers.
According to reports in The Guardian, housing minister Grant Shapps said the new scheme could help around 100,000 people who have managed to save £10k to buy their own home. The average deposit is reportedly around £40k.
New details just released confirm that the NewBuy Mortgage Guarantee Scheme will in fact be open to everyone not just first time buyers. It is only valid for new build flats and houses to buy for up to £500k. However, it’s worth noting here that £500k cap may vary according to location. The final details are apparently still being hammered out between the government, developers and nationwide building society one of the scheme’s lenders.
There are two main conditions applicants must meet in order to be eligible for the scheme:
- Potential borrowers must be UK citizens
- The property they intend to buy must be their main residence.
Mr Shapps commented:
“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 that we shall not repeat these mistakes of the past. That’s why I’m pulling out all the stops for those who want to get on the property ladder, so from March the NewBuy Guarantee Scheme will be on hand to help people buying newly built properties with just a fraction of the deposit they would normally need.”
The government has reportedly found sites for 80,000 new homes and is in negotiations with the BBC and Network Rail to release more sites for new build houses and flats to be built over the next few years.
Sources: The Guardian.