New Housing Plan May Fail to Help Buyers

by Mark Johnston

The ‘new buy’ mortgage scheme is supposed to help people with small deposits, particularly first time buyers, buy new build properties.

The government’s flagship ‘new buy’ scheme which is designed to revitalise the housing market and kick start the economy, may be in disarray as mortgage lenders fail to support it.

The scheme, which was launched in March, was meant to be rolled out rapidly. The government launched the scheme in a blaze of publicity. However, it seems that mortgage lenders have been slow to embrace the scheme.

Mortgage lenders who initially said they would offer the scheme, such as Nationwide, Natwest and Woolwich, appear to be unable to cope with the level of enquires they have received in the first few days and staff training has also been inadequate.

Some lenders also now feel that the whole scheme seems far too complicated to gain traction and they have also realised that 95% loans also means negative equity further down the line, which is not good even if the government underwrites part of the risk.

Lenders, it also seems are concerned that they will not benefit as much as builders would within this scheme and therefore they have not been very forthcoming in their support for the scheme.

The Home Builders Federation (HBF) have voiced concerns that the scheme has not been embraced by mortgage lenders as it should have been and that it is “not all what was envisaged”.

The normal lenders have not shown much interest in the scheme and this was not the intention.

The executive chairman of the House Builders Federation (HBF), Stewart Baseley, has therefore written to builders expressing his frustrations, he told builders “I want to assure you that the House Builders Federation has made both the Council of Mortgage Lenders and the government fully aware of these problems”.

Due to the concerns from house builders the treasury has now been forced to urge UK lenders to back the ‘new buy’ scheme, especially after a “far from satisfactory launch”.

The treasury office have said they will endeavour to come in t direct contact with the lenders at their senior management level to work out the intentions of each lender and to also put pressure upon them to take up the scheme as one of their priorities.

A spokesman for the department of Communities and local government added “we are all working together to quickly expand the ‘new buy’ scheme.

A spokesperson for the Council of Mortgage Lenders (CML) said on behalf of lenders that “the challenges involved in implementing the scheme to very demanding timetable have been considerable”.

The 3 current lenders in the scheme are clearly waiting for Lloyds to enter the field given its sizeable market share in the new build mortgage market, some experts feel. Lloyds and Santander are both due to launch the scheme within the next 2 months.

However, even though some big lenders have got on board with the scheme some financial experts have urged home buyers to treat the scheme with caution before signing up.

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