The Government’s mortgage indemnity scheme will be available to borrowers buying new build houses and flats up to £500,000 as their main home.
In a speech today, housing minister Grant Shapps said the NewBuy guarantee scheme will be available to those moving house as well as first-time buyers.
The NewBuy scheme is set to launch in March. The Government says the scheme will allow buyers with a £10,000 deposit to purchase a new-build property.
The Government first set out the proposals of the scheme in November. It will see house builders deposit 3.5 per cent of the sale price for each home sold through the scheme in an indemnity fund.
The Government will provide additional security of 5.5 per cent. The house builders contribution will be held by the lender for seven years and interest will be payable on it. Funds will be returned to the developer after the seven year period minus a portion of any losses on the loans in the scheme. A central administrator will create “silos” of funds that apply between lenders and house builders.
In the event of repossession, and the house being sold at a loss, the lender will be able to recover 95 per cent of any shortfall through the scheme. Public money will only be at risk if the borrower and the fund cannot cover costs.
Up to 100,000 mortgages are to be backed by the scheme which the Government says is a “manageable risk”.
Speaking today Shapps said: “I am 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.”
Shapps is also working with nine public bodies and Government departments including the BBC, Network Rail and Royal Mail to identify unused land and buildings that could be released for house building.
He said enough Government land has already been identified that would enable over 80,000 new homes to be built.
The Ministry of Justice, the Treasury, the Home Office, the Department for Energy and Climate Change, the Department for Business, Innovation and Skills and the Department for Culture, Media and Sport will also look at their land holdings.