Brokers predict the Government’s indemnity guarantee scheme will be a success after Barclays, Nationwide and Nat-West launched cheap 95 per cent loan-to-value products for newbuild homes.
The NewBuy scheme, which launched this week, will allow buyers with a 5 per cent deposit to purchase a newbuild property worth up to £500,000. Housebuilders will deposit 3.5 per cent of the sale price for each home in an indemnity fund and the Government will provide additional security of 5.5 per cent.
The builder’s 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.
There have been concerns that the scheme could fail if lenders were unwilling to offer low-price loans.
This week, NatWest launched a two-year fixed rate at 4.29 per cent and a five-year fix at 4.99 per cent. Barclays has a 4.99 per cent two-year fix and a 5.89 per cent four-year fixed rate and Nationwide launched a 5.69 per cent three-year fix and a 5.99 per cent five-year fix. NatWest will only offer its deals direct, Barclays will offer them both direct and through intermediaries. Initially, Nationwide will offer its deals only through intermediaries but will make them available direct at a later date.
Both Santander and Halifax say they will join the scheme in the coming months.
London & Country associate director of communications David Hollingworth says: “These products show there is an appetite to use the scheme as it was intended, so I think it will be a success.”
Capital Fortune managing director Rob Killeen says: “Anything that will increase the ability of first-time buyers to get into the property market has to be warmly welcomed.”