‘Newbuy’ Mortgages

by Mark Johnston

The ‘newbuy’ mortgage scheme has been launched as a way to persuade first time buyers back on to the property market, whilst also stimulating the building industry and the economy.

This scheme aims to help 100,000 home buyers who have only a 5% deposit to purchase a new build property, up to the value of £500,000.

The ‘newbuy’ scheme is open to all buyers as long as they are UK citizens and are buying their property as their main home.

Paul Smee, director general of the Council of Mortgage Lenders (CML), stated “newbuy mortgages will help creditworthy borrowers who simply have not yet managed to build up a large enough deposit to gain access to finance to buy a newly built home”.

At present there are only 3 high street lenders that are offering mortgage deals for those borrowers interested in the government backed mortgage indemnity scheme.

The Council of Mortgage Lenders (CML) said that while just 3 lenders have launched products, it looks forward to other lenders joining the scheme over the coming months.

Lloyds and Santander are both to launch their products with in the next few months.

Barclays, Nationwide building society and Natwest are the first lenders to reveal details of their 95% mortgage rates that they will offer through the new scheme over the coming months.

Natwest is offering a 95% loan to value (LTV) deal on both a 2 year fix at 4.29% with a fee of £499 and a 5 year fix at 4.99% with a £499 fee. Its deals are only available direct.

Barclays is offering a 2 year fix at 4.99% and a 4 year fix at 5.89%, both of which come with a £499 fee. The products will primarily be sold via intermediaries but will also be available direct.

Nationwide has launched a 3 year fix at 5.69% with a £900 product fee and a £99 booking fee and also a 5 year fix at 5.99% with the same fees.

These rates are only at present available to people buying new build property through Barratt, Bellway, Bovis, Linden homes, Permission, Redrow and Taylor Wimpey.

Some mortgage experts suggest that these rates compare favourably to existing 95% mortgage deals available now on the open market.

The Natwest provides the most competitively priced with its 2 year fixed at 4.29%. However, their decision to sell ‘newbuy’ products direct through its call centre has frustrated many brokers.

There has been much criticism in the intermediary community regarding Natwests decision ton only offer its ‘newbuy’ products directly.

David Finlay, intermediary managing director for Barclays, said of Natwests decision not to sell through brokers, “I can see how frustrating this might be for brokers who, after all, are arguably in the best position to offer professional, independent advice”.

A spokesperson for Natwest, said “due to the specialist nature of the newbuy scheme, a dedicated telephone based team has been set up specifically to deal with all mortgage applications using this scheme”.

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