The Prime Minister David Cameron insists that the coalition Government’s plans to take a more pro-active role in the UK housing market is “absolutely right” in order to help struggling potential buyers to raise large deposits.
Speaking at a residential property construction site in Lewisham, Mr Cameron attempted to reassure people seeking mortgage advice, stating that the NewBuy Guarantee initiative will help “unblock” the housing market by providing 95% Loan-To-Value mortgages underwritten by homebuilders and the UK Government.
Three major mortgage providers have so far committed to the Government-backed NewBuy scheme.
Barclays, Nationwide Building Society and NatWest Home Loans intend to back the NewBuy scheme by offering products which will tie in with it. Santander and Halifax are also expected to begin offering similar mortgage products along the same lines at a later date.
The mortgage indemnity initiative will aim to help people invest in property even if they only have a deposit of 5% or 10%.
As well as helping people who are finding it tough to save towards 20% deposits, the project is designed to boost the construction sector by spurring demand for new-build properties.
First Time Buyers (FTB) looking to purchase homes in England worth up to £500,000 could be eligible for the scheme in the months to come. The Government will cover 5.5% of the value of each mortgage provided, while 3.5% will be covered by house builders.
Forecasts suggest that as many as 100,000 UK new build home buyers could gain mortgage funding through the scheme.
Mr Cameron said: “The problem today is we have lenders who are not lending so builders cannot build so the buyers cannot buy and it needs the government to step in and help unblock the market. The new scheme was absolutely right in attempting to lower the requirements to more affordable levels of between “£10,000 to £15,000” with the taxpayer and the construction industry underwriting the high loan-to-value (LTV) mortgages”.
However, as reported on “Spotlight” earlier this week, the scheme has already prompted heavy criticism from opposition parties.Read the full article here
Labour’s shadow housing minister Jack Dromey was among the first to be openly critical of the mortgage indemnity scheme proposal, publicly stating that the Government needed to invest directly in the building of more new homes.
Some property industry pundits have labelled the scheme as a “gimmick” to boost the ailing UK construction sector.
Even some lenders remain fairly wary of the Government’s plans and are yet to sign up to the initiative, with only three major lenders signed up to take part so far.
Nonetheless, the Council of Mortgage Lenders has backed the scheme as “good news for home-buyers”.
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