A new mortgage indemnity scheme has recently been launched by the government which is set to help first-time buyers get into the property market. The scheme means that mortgages will be guaranteed in part by the taxpayer, and in part by building companies who have built homes.
The scheme is being called the NewBuy project and it is being supported by several major banks in the UK including, Natwest, Barclays and Nationwide. It is expected that the scheme is going to mean that people can borrow up to 95 percent of the cost of a new home.
The firms who have constructed the property will pay 3.5 percent of the value of the property, which in itself should help buyers get on the property market. In the case of a major property market crash, another 5.5 percent can be taken from the taxpayer, but this will only happen in an emergency situation. Some critics of the scheme have said that it is nothing more than the government offering a helping hand to the construction industry.
David Cameron has also recently announced that he is going to extend the scheme where council tenants can purchase their homes for a discounted rate. For those who are staying in homes for over five years, they can be entitled to up to a 35 percent discount on the price of the property.
Furthermore, they can receive an extra two percent discount for every extra year they have been in the home. There is a cap on this amount however, which is set at £75,000. For those who live in a council flat, they can get up to a 50 percent discount on the value of the property after five years in it.
Mr Cameron commented, “A stable community comes from the ability for people to own their own homes and this is something that we very much want to encourage. These two schemes are going to mean that more people can own homes, whether they are buying property for the first time, or they are looking to buy their council home.
The current situation is not working, and it is clear that many people are simply unable to purchase their first home, this is something we are committed to changing and these projects are the first step.”
The NewBuy scheme is only being run in England, and only homes the cost under £500,000 will qualify for the scheme. Grant Shapps is the housing minister and he has said, “The average age of the first-time buyer has risen significantly as people are simply unable to afford to get on the property ladder.”
The Home Builders Federation is headed by Stuart Baseley and he has commented, “This scheme is going to have many benefits for the economy. As well as allowing people to get their first step on the housing ladder it is also going to boost the construction industry as the demand for homes will increase.
This is going to result in a lot of extra job creation which is going to be very beneficial for the country.” It is estimated by the construction industry that this scheme will result in the creation of 500,000 jobs, through the construction of 100,000 homes.
The Labour Party have been critical about the scheme with Jack Dromey, the Housing Minister stating, “The number of banks, as well as builders involved with the scheme, has fallen significantly since it was first announced and this is something that the government need to answer questions about.