NEWBUY SCHEME
home sooner than might otherwise be possible. “NewBuy is good news for home-buyers,
and potentially good news for jobs and the wider economy too,” says CML director general Paul Smee.
LAUNCHED IN LEWISHAM
The NewBuy scheme was launched at Barratt London’s Renaissance development in Lewisham. Barratt says that around 20,000 potential homebuyers have already pre-registered their interest on the company’s website nationally with the weekly registration rate now hitting 1,500. Prime Minister David Cameron, said,
“Strong families and stable communities are built from good homes. That’s why I want us to build more homes and I want more people to have the chance to own their own home. “It’s no good hoping people will climb
the property ladder if the bottom rung is missing. Affordable properties and available mortgages are vital. “So we’re working with leading house builders and lenders to get the scheme underway. “It’s a vital boost to the housing market,
giving people good affordable new homes and backing thousands of jobs in construction in the process.” Gary Patrick, Regional Sales Director at
Barratt London said, “This is a significant change for the housing market in London and we are seeing substantial levels of interest.”
“I would urge anyone interested to
contact us as soon as possible. We will explain how the new system will work and talk our customers through the reduced deposit requirements.”
Barratt development in Dalston Square.
CML’S FAQS
What is NewBuy? People thinking of buying a newly-built home, who do not have a large enough deposit to qualify for a mortgage, may qualify under the NewBuy scheme. They will still need to have saved a deposit of at least 5 per cent of the price of the home they wish to buy.
How does someone buy a new build property under NewBuy? Home buyers can either visit a participating new-build development or a mortgage lender in the scheme to discuss eligibility, or they can approach a mortgage intermediary who is introducing mortgages under the scheme. Those wishing to buy a
new home under the scheme, and who meet the lender’s affordability and credit criteria, will be eligible for a mortgage loan up to 95 per cent of the purchase price. Lenders will assess mortgages under the scheme in the normal way.
What is an indemnity and what does it mean for the borrower? A mortgage indemnity protects the lender if, at some future stage, the borrower falls behind with their mortgage payments and the lender has to repossess the property and sell it. This can result in a loss to the lender if the property has to be sold for a value lower than the remaining value of the mortgage. Under NewBuy, the home builder puts aside a proportion of the sale price into a special
indemnity fund and, when this is exhausted, Government provides a further guarantee to an agreed level. If the property is
repossessed and sold for less than the amount of the outstanding mortgage debt, the lender can claim on the mortgage indemnity to recover some of its loss. The basic security for the mortgage is the property. The mortgage indemnity, therefore, acts as a form of additional security for the lender. The existence of the indemnity does not provide any additional protection for the borrower nor protection from repossession. It does not cover the borrower against negative equity or a shortfall between the sale price and the outstanding debt. In the unfortunate
event of a home being repossessed, the borrower will still be responsible for repaying any shortfall between the sale price of the property and the outstanding mortgage debt. This is the same as it would be for any borrower outside the scheme.
What are NewBuy’s eligibility criteria/ exclusions? To qualify for NewBuy, properties will have to be: New build – residential properties being sold for the first time or for the first time in the current form Priced up to £500k – but there will be no cap on income Full ownership – NewBuy will not be available for shared
ownership or shared equity purchases Primary homes – NewBuy will not be available for the purchase of second homes, for investors or for buy-to-let purchases. Buyers will have to be UK citizens and those with a right to remain indefinitely in the country. It will not be possible to use NewBuy in conjunction with any other publicly funded mortgage schemes. NewBuy will not apply to interest-only mortgage products.
Which lenders/ builders are participating? At launch, these lender/ builder relationships were available under NewBuy (more to follow): Barclays will offer 95
per cent Loan-to-Value mortgages on properties built by Barratt, Bellway, Bovis, Persimmon, Redrow and Taylor Wimpey at 4.99 per cent fixed rate for two years and 5.89 per cent fixed rate for four years Nationwide who will
offer 95 per cent Loan-to- Value mortgages on properties built by Barratt, Bovis, Bellway, Persimmon, Redrow and Taylor Wimpey at just 5.69 per cent fixed rate for three years and 5.99 fixed rate for five years; and NatWest who will offer
95 per cent Loan-to-Value mortgages on properties built by Barratt, Bellway, Bovis, Linden Homes, Persimmon, Redrow and Taylor Wimpey at just 4.29 per cent fixed rate for two years and 4.99 per cent fixed rate for five years.
PROPERTYdrum APRIL 2012 17
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