The NewBuy Guarantee scheme – what it means to homebuyers


Monday 6th February 2012

Last week, housing minister Grant Shapps announced more details about the Government's plans to help homebuyers struggling to find a property that they can afford. Called the NewBuy Guarantee scheme, it will provide help to creditworthy purchasers of new-build homes - both first-time buyers and existing homeowners who want to move house - by underwriting 95% mortgages on properties valued at up to £500,000. Up to 100,000 buyers could benefit from the scheme, able to buy a brand new home with a deposit of as little as £10,000.

While final details have yet to be thrashed out between Government, lenders and housebuilders before the scheme is officially launched in March, the new details unveiled by Mr Shapps reveal its main parameters and who can expect to benefit. The main restrictions are that applicants are UK citizens and that the property is to be their main home.

Many first-time buyers, and homeowners with little equity in their property, are currently hamstrung in their wish to buy a new home by lenders. A lack of mortgage availability (there are currently only a third as many mortgage products in the UK than there were five years ago), high deposit requirements of the best-value mortgages and the prohibitive interest rates charged on many low-deposit home loans have left many prospective buyers unable to make a move.

The NewBuy Guarantee will underwrite affordable 95% mortgages on new-build properties, allowing prospective buyers struggling to save a large deposit to acquire a loan with a reasonable rate. New homes developers and the Government will jointly fund guarantees to lenders that they won't lose money through repossessions or negative equity, in return for the lender accepting smaller deposits and charging more affordable interest rates.

Mr Shapps says: "The pattern of the past has been to produce endless policies and initiatives that simply gather dust on Whitehall shelves and lead to inaction and inertia. But with the Prime Minister putting housing centre stage on the road to economic recovery, I am determined that we shall not repeat these mistakes of the past. That's why I'm pulling out all the stops for those who want to get on the property ladder, so from March the NewBuy Guarantee scheme will be on hand to help people buying newly built properties with just a fraction of the deposit they would normally need."

Some housebuilders have already announced their own 95% mortgage schemes, but NewBuy Guarantee is set to increase the number of potential homebuyers who could benefit considerably. The Government has also identified sites for some 80,000 new homes and is consulting with the BBC, Network Rail and Royal Mail, along with Government departments and organisations, to release more sites, to increase the number of new-build apartments and houses for sale in the next three years.

Kings Hill from Hillreed Homes

The NewBuy Guarantee, to be launched in March 2012, will provide underwritten 95% mortgages to first-time buyers and homeowners who are UK citizens, allowing them to buy a new-build property for use as a main home, with a value of up to £500,000