Doubts raised over NewBuy housing scheme


A scheme to inject life back into the housing market was mired in uncertainty today as lenders expressed reservations just days before it launches.

The NewBuy Guarantee scheme to help people buy a new-build home with a fraction of the usual deposit is set for launch next week but concerns have been raised that it is being rushed through in time for the Budget.

The Government initiative is part of a package of measures unveiled last year aimed at kick-starting the flagging housing market as well as boosting the construction industry.

It was initially intended to help the first-time buyer proportion of the market, which shrunk back to a three-year low last autumn, but the Government has widened the scheme to include home movers.

The plans would enable as many as 100,000 buyers to purchase a new-build home with a deposit of just 5% or 10% rather than the 20% typically demanded by lenders, and the initiative has been backed in principle by several banks.

But sources have suggested some lenders are not ready to start offering products and it was unclear how widely available they will be when the scheme launches next week.

Lenders' support is vital to the success of the scheme and fears have also been raised that high mortgage rates could put would-be buyers off the initiative.

The scheme is expected to launch on Monday, although the Department for Communities and Local Government (CLG) has not given details.

Those behind the initiative believe lenders will see it as less risky as it is backed by an insurance scheme contributed to by the building industry and Government.

Developers would contribute 3.5% of the purchase price while the Government guarantees 5.5%. The scheme is available on flats and houses up to a maximum value of £500,000 in England only.

But one banking source said some lenders needed time to get to grips with the idea.

"It's not a scheme that's going to change the housing market," the source said. "It's there to support house builders, not necessarily to support home buyers as a priority."

The source doubted that the scheme would help those with a poor credit history get on the property ladder as buyers would be subject to the same standard of checks as they are with mortgages generally.

Another banking source said those in the industry were not "terribly enthusiastic" about becoming involved in the scheme and said lenders were already looking at other ways to help people get on the property ladder.

The Financial Times reported earlier this week that a dispute has emerged over the price banks are prepared to charge for a 95% loan-to-value (LTV) mortgage.

It suggested that they are looking to charge 5% or more, but house builders believe this may put people off the scheme.

The scheme is also viewed by some as complicated, operating through a Guernsey-based insurer owned by the Home Builders Federation (HBF).

However, a spokesman for the Council of Mortgage Lenders (CML) expressed a more positive view, saying: "We are anticipating a number of lenders are working on plans to support the scheme. There is lender support and interest in the scheme.

"This is part of a wider approach to stimulating demand in the economy and it is part of a growth package and a series of measures."

The CML did not have examples of any immediate plans by lenders to make announcements relating to the scheme.

A Lloyds Banking Group spokeswoman said the banking giant is planning some products and more details would be announced soon.

She said: "We are still finalising the details of the products that will support the NewBuy initiative. We remain supportive of the scheme and look forward to sharing more detail next week."

A spokesman for HSBC, another lender which has backed the scheme, said: "We are supportive in principle but have no specific details on how we may be involved in NewBuy."

Barratt said 20,000 people have already registered with the home builder for more information about the scheme.

A spokesman for Barratt said the scheme had the potential to be "very significant" but added he did not know what rates lenders were planning to offer.

Housing Minister Grant Shapps recently said he has already identified enough Government land to build 80,000 homes and ministers are on course to release enough land for 100,000 homes by 2015.

He said he is in talks with the BBC, Network Rail and the Royal Mail in a drive to free up unused sites for housebuilding.

Mr Shapps recently said: "I'm pulling out all the stops for those who want to get on the property ladder, so from March the NewBuy Guarantee scheme will be on hand to help people buying newly-built properties with just a fraction of the deposit they would normally need."

The CLG said in a brief statement: "We are working closely with lenders and house builders to deliver the NewBuy Guarantee, which will enable people to buy newly-built homes with a much smaller deposit than currently required. The scheme will be launched next week."

An HBF spokesman insisted that lenders were behind the scheme, saying: "Lenders are on board and so are we."


Discover more property articles at Homes and Property
Scunthorpe goalkeeper Sam Slocombe (left) is congratulated by winning penalty taker Miguel Llera (right)
Life and Style
A woman walks by a pandal art installation entitled 'Mars Mission' with the figure of an astronaut during the Durga Puja festival in Calcutta, India
techHow we’ll investigate the existence of, and maybe move in with, our alien neighbours
Arts and Entertainment
Sir Ian McKellen tempts the Cookie Monster
tvSir Ian McKellen joins the Cookie Monster for a lesson on temptation
Tourists bask in the sun beneath the skyscrapers of Dubai
travelBritish embassy uses social media campaign to issue travel advice for festive holiday-makers in UAE
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Direct Sales Consultants - OTE £65,000 - £100,000

£65000 - £100000 per annum: Recruitment Genius: This national direct sales com...

Recruitment Genius: Telesales Consultant - OTE £40,000

£20000 - £40000 per annum: Recruitment Genius: Can you sell? Want to earn over...

Recruitment Genius: Partitioners / Carpenter / Multi Skilled Tradesmen / Decorator

£28000 - £50000 per annum: Recruitment Genius: Various opportunities are avail...

Recruitment Genius: Trade Marketing Manager

£25000 - £30000 per annum: Recruitment Genius: This company leads the market i...

Day In a Page

Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas
La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

Deaf community outraged by La Famille Bélier

The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
10 best high-end laptops

10 best high-end laptops

From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
Susie Wolff: A driving force in battle for equality behind the wheel

Susie Wolff: A driving force in battle for equality behind the wheel

The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

'No abs Adam' plans to muscle in on Usain Bolt's turf

After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
Calls for a military mental health 'quality mark'

Homeless Veterans campaign

Expert calls for military mental health 'quality mark'
Racton Man: Analysis shows famous skeleton was a 6ft Bronze Age superman

Meet Racton Man

Analysis shows famous skeleton was a 6ft Bronze Age superman
Garden Bridge: St Paul’s adds to £175m project’s troubled waters

Garden Bridge

St Paul’s adds to £175m project’s troubled waters
Stuff your own Christmas mouse ornament: An evening class in taxidermy with a festive feel

Stuff your own Christmas mouse ornament

An evening class in taxidermy with a festive feel
Joint Enterprise: The legal doctrine which critics say has caused hundreds of miscarriages of justice

Joint Enterprise

The legal doctrine which critics say has caused hundreds of miscarriages of justice
Freud and Eros: Love, Lust and Longing at the Freud Museum: Objects of Desire

Freud and Eros

Love, Lust and Longing at the Freud Museum