Government launches scheme for new-build homes

by Aaron Strutt

Nov 24 2011

The government has announced a new housing strategy to make it easier for first-time buyers to get on the property ladder.

The initiative will allow up to 100,000 first-time buyers to purchase a new-build property with a 5% deposit, with the government and house builders providing security for the loan.

This means if the property is sold for less that than the outstanding mortgage balance, the lender will be able to recover the loss.

Through the scheme, which will be launched in spring 2012, the hope is that lenders will be encouraged to offer more low deposit mortgages.

The Council of Mortgage Lenders says that the details haven't been finalised, but the idea is:

• The builder will pay a sum equivalent of 3.5% of the selling price of the home to the lender, which will be held for seven years.
• The government will agree to guarantee a further 5.5% of the property value.
• The money collected and the governments guarantee is a form of indemnity. The fund pays out to the lender if a property financed under the scheme is repossessed or there is a shortfall.

The government says that some of the biggest mortgage lenders have signed up in principle to the new indemnity scheme and they include:  Barclays, HSBC, Lloyds Banking Group, Santander and Yorkshire and Clydesdale Banks.

They also confirmed that over 25 developers have agreed in principle to the scheme, including: Barratt, Persimmon and Taylor Wimpey.

24 November 2011