Last month, Barclays, Nationwide and NatWest signed up to the government’s NewBuy scheme, potentially bringing good news to frustrated buyers who have struggled to raise sufficient deposits.
NewBuy was launched back in early 2011 and has been given a largely warm reception. But it seems that, while many stand to benefit, it will not assist all potential buyers.
NewBuy covers English new-build property worth up to £500,000, and sees housebuilders lend 3.5% of the sale price to the mortgage lenders while the government guarantees 5.5% of that sum in the event that there is a price crash.
In exchange, mortgage lenders will offer 95% mortgages on the properties, enabling buyers to make their purchase with smaller deposits. Of the three banks, NatWest rates, at least on the surface look the best (see the table below) but all three sets of figures suggest a serious commitment to the plan.
|Bank||Fixed Rate for 2 years||Fixed Rate for 5 years|
The government boldly predicts the scheme will help 100,000 buyers – most of them first-time buyers – and enable the employment of 50,000 construction workers by a number of major housebuilders including Barratt, Bovis and Taylor Wimpey.
Halifax will announce its NewBuy products this month and a growth in backing by the major lenders should see an improvement in the terms offered.
With a £200,000 property now possibly requiring ‘just’ £10,000 up front, there will be many buyers looking to take advantage.
But while a reduction in the deposit required helps tackle the issue of very high rents would-be buyers are having to pay, it does not tackle the major issue of overall property prices remaining out of reach for so many.
Arguably a scheme that helps prop up the housebuilders helps keep property prices artificially high, as otherwise the developers would have to drop their price.