NewBuy has given the property market a boost with a scheme that offers buyers the opportunity to buy a new home with a minimum deposit of 5%. Within six months of its launch, the scheme has already hit 1300 reservations.
When this government-backed scheme was introduced, NewBuy had just seven builders and four mortgage providers. Today there are over 30 developers selling homes through NewBuy, and with Aldermore joining the scheme, the mortgage lenders have increased to six.
Stewart Baseley, Executive chairman of the Home Builders Fedaration, which developed the scheme said: “We know people want to buy, but many have been thwarted by the current large deposit requirements. NewBuy is proving a lifeline for people as it allows them to buy their dream home with a 5% deposit. We are now starting to gain some real momentum and with more and more builders and lenders coming on board, we are confident NewBuy will make a real difference.”
First-time buyers, as well as second-timers whose present homes do not hold sufficient equity are eligible for the scheme, provided they opt to buy a new building and are able to put up the initial 5% deposit.
Under this scheme, the developers pay the lender 3.5% of the purchase price of a new-build home and the government gives an additional guarantee of 5.5%, which enables lenders to offer mortgages with a lower deposit and minimal risk. Moreover, NewBuy protects lenders against losses arising from default in repayment, as it is paid by the developer and guaranteed by the Government.
This scheme has seen success in such a short period that the Scottish and Welsh Governments are working on introducing schemes along the same lines.