On 12 March 2012, the government launched the NewBuy scheme. The scheme is intended to boost housing supply and provide access to mortgages for those who can afford mortgage repayments but do not have large savings.
The scheme is not available for:
- Second homes or buy-to-let properties
- Shared ownership or shared equity purchases
A potential buyer can apply to participate in the scheme if the following apply:
- The buyer has a deposit of between 5 and 10% of the sale price
- The buyer is a UK citizen or has the right to remain indefinitely
- The property is a new build property with a sale price not exceeding 500,000
- The property will be the buyer’s primary home
The housebuilder must deposit 3.5% of the sale price into an indemnity fund, and the government will provide a guarantee of 5.5% of the sale price. If the property is repossessed and the lender cannot recover the full amount of its loan, it can draw on the indemnity fund in the first instance, and then on the government’s guarantee.
Newbuy has been designed by the Home Builders Federation and the Council of Mortgage Lenders. It is hoped Newbuy will allow thousands of people to buy a new home and help free up the housing market. However thereare concerns that Newbuy will not be enough to kick-start the property market and that any quick fix which Newbuy offers could have negative effects on the market in the long-term.