In recent years, banks have demanded bigger and bigger deposits from house buyers, making it harder for first time buyers to save up enough to get on the property ladder. A 20% deposit is usually demanded by lenders now.
Under the new ‘NewBuy guarantee’ scheme, banks will be protected against any losses they incur if they offer mortgages to buyers with only a 5% deposit. The two conditions are that the houses must be new-build and only up to £500,000 in price.
The scheme has been welcomed by housebuilders.
Linden Homes managing director Ian Baker said: “It is encouraging to see the government making a bold move in boosting mortgage availability and showing real confidence in the market once again. New home construction provides a significant contribution to the UK’s general economic growth and the availability of mortgages is a major contributing factor in this. We are now keen to see major high street lenders get on board with the scheme to ensure its benefits can be felt across the country.”
Mr Baker added: “Since the recession first hit, many would-be homebuyers have found themselves unable to save the hefty 20% deposits required by lenders and so as a consequence were pushed into the unsustainably overcrowded rental market.
“We know the demand for new homes is there, and we are seeing record numbers of people visiting our sites across the country - last quarter alone, we had almost 2,000 first time buyers register an interest via our website to receive information about our specific developments. However, buyers are telling us that mortgages remain difficult to obtain. And it’s not just first time buyers saying this – many existing homeowners are struggling to move into a new home due to a lack of equity in their properties due to a downturn in valuations.”
The Federation of Master Builders (FMB) also welcomed the initiative. Chief executive Brian Berry said: “Lack of affordable finance is still the greatest constraint for first time buyers wanting to get on the housing ladder. The result is that the average age of the first time buyers is now 37. It is good that the government is making considerable efforts to widen access to the scheme to smaller builders as small building firms still deliver around a third of our housing annually and are essential to any attempt to increase housing output. They are also best placed to bring forward the small brown-field sites that are essential to meeting our needs without placing undue pressure on green belt land.”
He added: “While small house building firms will need to examine the details and make a decision on whether the scheme will work for their business, we urge small house builders to at least look at the details as it is a scheme with considerable potential.”
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