Estimates for newbuy sales slashed
One of the architects of the government’s vaunted new-build mortgage guarantee scheme has admitted that it might only deliver a quarter of the number of sales originally estimated.
The Home Builders Federation, which runs the newbuy scheme alongside the Council of Mortgage Lenders, has said that current lending rates being offered by mortgage providers might restrict the programme to just 25,000 sales.
The news comes less than a month after the Communities and Local Government department revealed that just 250 homes had been bought under newbuy between its launch in March and the end of June.
The HBF insisted that it had never put a target on the number of sales likely to be achieved through the scheme but CLG said at the time of the launch that it aimed to achieve 100,000 sales by allowing prospective buyers to access a mortgage with as little as a 5 per cent deposit.
The trade body added that the constraint was not in how many homes could be built but on buyers’ ability to access finance.
‘We can deliver more homes but it’s about if enough people can qualify for a mortgage,’ said a spokesperson for the HBF. He added that 25,000 was ‘a realistic target’ but that the number could increase if economic conditions change.
‘The take-up rate is steadily increasing; if it continues at that rate there’s a hope we can do more but we have to see what happens over the next year or two.
‘We’ve never put a target on it because it’s very difficult to know where we’re going to be in two years’ time.’
Under newbuy, participating lenders agree to make loans worth 95 per cent of the value of the property in return for security provided by the house builder and government. It has come under fire for failing to offer competitive rates to prospective buyers, despite the government effectively underwriting the mortgages.
A CLG spokesperson said: ‘Ministers are determined to pull out all the stops to help aspiring homebuyers to take their next step onto the property ladder.
‘While the Home Builders Federation has estimated there will be 25,000 additional sales through newbuy, the door is open to far more people to access a new home as we have made provision to support up to 100,000 people to access the scheme and buy a newly-built property for a fraction of the deposit than they would normally require.’