The latest helping hand to those wishing to climb onto the housing ladder in England has been launched in the shape of HomeBuy, the latest Government mortgage indemnity scheme. Building firms and the taxpayer will be the co-guarantors of property bought by existing or first-time buyers, in a scheme that is backed by some high street names. Barclays, Nationwide and Nat West are supporting the NewBuy scheme, where people will be able to borrow up to 95% of the value of their new home.
The scheme works as follows; the builder pays 3.5% of the sale price into a special account held by the lending bank for seven years. The taxpayer will provide additional guarantees of 5.5%, but that money will only be called upon in the event of a ‘major property crash.’ NewBuy is backed by the Home Builders’ Federation (HBF) and the Council of Mortgage Lenders (CML) and seven construction firms; Barratt, Bellway, Bovis, Linden Homes, Persimmon, Redrow and Taylor Wimpey. The scheme is available on flats and houses up to a maximum value of £500,000.
Critics of NewBuy suggest that it is just a ruse to help the construction industry and that the Government is artificially meddling in the housing market and simply postponing an inevitable property crash. Housing Minister, Grant Shapps, disagrees of course: “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,” he said. The construction industry hopes the plan will lead to an extra 100,000 properties being built and the creation of 500,000 new jobs. Barratt homes say that 20,000 people have already registered for more information about the scheme.
At the same time as the NewBuy scheme launch, the Government is overhauling the controversial ‘right to buy’ scheme. Social tenants who have lived in a council house for five years could receive a 35% discount if they chose to buy their home, with an extra 1% discount added for each subsequent year – up to the value of £75,000. Those living in flats will get 50% off after five years and an extra 2% discount for every year after that. The Government says that the cash generated from these sales will go towards “affordable homes for rent.”
Sources: bbc.co.uk, communities.gov.uk (image courtesy of davidhencke.wordpress.com)