Lender Hike ‘new buy’ Rates

by Mark Johnston

The ‘new buy’ scheme aims to help buyers on to the housing ladder by allowing them to buy a new home with just a 5% deposit and this is due to the house builder and government backing the loan.

Housing minister, Grant Shapps said of the scheme “thanks to the agreements we are striking with lenders and builders across the industry, those aspiring to get on to the property ladder are now able to do so”.

The major lenders already signed up to the scheme are: Natwest, Woolwich, Barclays and Nationwide.

Although, just weeks after the scheme came under fire for its failure to attract enough lenders a fourth bank, the Halifax, has signed up to the governments new buy mortgage indemnity scheme.

Stephen Noakes, mortgage director at Halifax, stated “as the leading lender in the new build market, we are proud to support the new buy scheme”.

The building society has launched the scheme with a 2 year fixed deal at 5.99% and another at 6.39%, which is fee free.

However, just 43 days after the launch of the scheme banks have quietly raised their rates for the scheme by up to 22%.

Natwest offered the best initial rate when the scheme was first launched at 4.29% for a 2 year fixed rate and 4.99% for a 5 year fixed rate. Its new 2 year deal is 4.79% and the 5 year deal 5.49%.

Woolwich has raised its rates from 4.99% fixed for 2 years to 6.09% on a 3 year fix. Nationwide has also pushed up rates on its 3 year fixed deals by 0.2% and 0.1% on its 5 year fixed deals.

Experts say that they could understand the rates being so high if the lenders were taking on all the risks, but that is not the case.

Taylor Wimpey became the latest house builder to raise concerns about the government’s flagship plan to stimulate the property market. Pete Redfern, Taylor wimpey chief executive, said “there has been strong interest from customers in the scheme but its success will depend on lenders providing competitively priced mortgage products”.

Other house builders in the scheme stated that “buyers are being put off by the disappointing lending rates on offer”.

Most builders within the scheme have argued that it is unlikely to succeed because banks are charging ‘excessive’ rates of around 6%, which are far higher than other mortgage deals on the market at the current time.

Dominik Lipnicki, of Your Mortgage Decisions, said of the recent rate rises “it is taking advantage of people who have small deposits. It means fewer people will be able to afford to rake out the mortgage, when the point of the scheme was to ensure more could”.

The chief executive of house builder Permission, stated “there is nothing wrong with the concept of new buy, but to make it work we need a lower rate or people will be priced out”.

A spokeswoman for the Natwest said that the initial rates had ‘always’ been advertised as promotional.

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