Mortgage bulletin – Lenders already raising NewBuy mortgage rates


Tuesday 1st May 2012


NewBuy mortgages are all now more expensive than at launch

The government's NewBuy mortgage indemnity initiative has received a setback, with some of the limited number of mortgages available under the scheme having their interest rates increased by lenders. Just three lenders were signed up to NewBuy when it was launched in mid-March 2012, and all three have raised interest rates in the subsequent few weeks.

Barclays has replaced its original two-year fixed rate deal at 4.99% and four-year fixed-rate at 5.89% with a three-year fixed-rate mortgage at 6.09%. Nationwide has raised its three-year fixed rate by 0.2% to 5.89% and its five-year fix by 0.1% to £6.09%. NatWest hiked its two-year fixed rate by 0.5% to 4.79% and its five-year fixed rate similarly, to 5.49%.

Since the scheme was launched, Halifax has also entered the NewBuy market with a two-year fixed-rate mortgage at 5.99% and a five-year fixed rate of 6.39%.

There has been increasing criticism from some industry figures relating to NewBuy, relating to the relatively small number of housebuilders signed up to the scheme and the scarcity of mortgage deals available to buyers. The rates charged by lenders have also been condemned as too high, given that much of the risk of default is underwritten by the government and housebuilder. Even with the few products out there - now all more or less charged at the same rate - not all are available to every buyer on every development.

Dominik Lipnicki of Your Mortgage Decisions says: "It is taking advantage of people who have small deposits. It means fewer people will be able to afford to take out the mortgage, when the point of the scheme was to ensure more could."

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