Is The New Buy Scheme Working?

by Mark Johnston

A vibrant first time buyer market is the lifeblood of a healthy property market and therefore the government is ‘pegging’ its hopes on the success of their new buy scheme.

The scheme is intent on kick starting the building trade and helping more first time buyers on to the property ladder it does this by giving them access to a mortgage even if they can only manage to get together a 5% to 10% deposit.

The banks that have participated in the scheme so far have been convinced to lend on this riskier loan to value (LTV) ratio because of a special indemnity guarantee, funded jointly by the builder and the government.

‘New buy mortgages on offer at the moment are not readily available to view online as they are only available in branch or through an intermediary. It is also a shame that just 2 months in to the scheme launch lenders have quietly hiked their prices,

Many experts feel that the price hikes beg the question of whether lenders are jeopardising the programme before it has even really got going.

According to some current figures just 5 homes have been sold between 6 of the UK’s biggest house builders under the government’s flagship new buy scheme.

Conaccord Genuity analyst Alistair Steward, stated “having maintained a uniformly upbeat assessment of the scheme in their public statements, it appears there is mounting frustration among the builders”.

Steve Roche, Persimmon homes group communications director said “initial interest in the scheme through our website was extremely positive. However, we are concerned that as rates have risen to near 6% for the scheme, interest could be limited in the future”.

However, Steve Turner, head of communications at the Home Builders Federation (HBF) has warned that “the programme is still in the very early stages of what will be a 3 or 4 year initiative and once more lenders come on board we anticipate more competitive rates”.

The Home Builders Federation (HBF) has revealed new figures that show 400 people have reserved new homes through the new buy scheme. Stewart Basely, executive chairman, said “these figures make us very confident that the scheme will deliver tens of thousands of sales over the coming years”.

Barratt recently admitted that 1,600 potential purchasers were registering their interest each week, but that only 70 of its homes have so far been reserved using the new buy scheme.

With these mortgage rate hikes industry experts still believe that first time buyers need to able to afford the market so they can buy their first house in order to move the chain along and new builds are still in their opinion are still far too expensive. They feel this scheme still favours the developers.

Paul Smee, the Council of Mortgage Lenders (CML) director general, says “with a likely drop in activity over the next few months it will take some time before we can judge whether initiatives such as the New buy scheme will compensate for this effect”.

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