How is the Newbuy Scheme doing?

by Mark Johnston

How is the Newbuy Scheme doing?

It seems that all economists agree a home building programme would be one of the best ways of reviving the wider economy. Around 100,000 jobs would be created directly, with perhaps another 200,000 in companies supplying goods and services.

The Newbuy scheme introduced by the government was designed help get 100,000 struggling first time buyers on to the property ladder and breathe new life into the housing market.

NewBuy aims to help buyers onto the housing ladder by allowing them to purchase a new home with just a 5 per cent deposit because the house builder and the Government underwrite the loan.

Confederation of British Industry director general, John Cridland wants the scheme to be even more generous and has urged the Government to increase its risk in order to reduce the costs for borrowers.

There has also been suggestions that the scheme could also be linked to the Bank of England’s Funding for Lending programme in some way.

The government’s target is to help as many as 100,000 people move by 2015 under the scheme. Therefore under this ambitious target, more than 8,000 purchases should be completed every quarter.

According to figures three months after the government’s flagship NewBuy Guarantee scheme was launched, just 250 home purchases had been completed.

 A spokesperson from the Department for Communities and Local Government suggested that since the average house sale takes up to six months figures covering just the first four months of the scheme’s operationwere not enough to reflect its real progress and therefore it was still too early to rate the scheme’s success.

Since then the banks involved have quietly hiked mortgage rates, leaving building executives doubting whether the scheme will succeed at all.

However, the Home Builders Federation (HBF) have recently reported, 1,500 reservations have been made through NewBuy and that at least 25,000 additional new homes will be built as a direct result of the scheme.

 These new figures appear to demonstrate that aspiring home owners are  now recognising the opportunity the scheme gives for them to buy a newlybuilt home with a fraction of the deposit normally required.

According to the Council of Mortgage Lenders (CML) Six months after its launch theUKgovernment’s NewBuy scheme aimed at boosting the property market has made a solid start.

The Council of Mortgage Lenders (CML) also points out that the initiative was only ever likely to deliver a small number of sales in the first few weeks but it has gathered momentum, and broader participation by lenders and builders and increasing awareness among consumers have helped the scheme to grow.

This said it is clear that after only six months, it is still far too early to deliver a verdict on whether the scheme has created more jobs in the construction sector. This can only be an objective for the longer term, and it may be several years before we can judge the scale of the contribution from the NewBuy scheme.




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