The Government has launched an initiative to help first-time buyers get on the property ladder.
The New-House Buy Scheme is forecast to help as many as 100,000 first-time buyers buy a new-build home with a deposit of 5%, rather than the typical 10% demanded by most lenders these days.
Last autumn, the first-time buyer market shrank to a three-year low, with the average age of the first-time buyer rising to 37.
Housing Minister, Grant Shapps commented "The problem is not that people cannot afford the mortgages; rates have been low for a long time. They can afford the monthly repayments, they can't get the deposit together because unlike in the past, you can't get 95% mortgages which operated fine for decades in this country."
It is hoped that the scheme, which has been masterminded by the Home Builders Federation and the Council of Mortgage Lenders, will also provide a much needed boost to the construction industry and create more jobs.
Developers will contribute 3.5% of the purchase price and the government will guarantee 5.5%. The scheme is only available for new-build houses and flats up to the value of £500,000.
Those behind the initiative believe lenders will see it as less risky as it is backed by an insurance scheme contributed to by the building industry and Government. But one banking source said that some lenders will need more time to get to grips with the idea.
James Kersh, director at Sutton Kersh commented “Any initiative put in place to help the housing market should be welcomed, and for first-time buyers it is incredibly tough at the moment. However, incentivising people to purchase new-builds and not the lower end stock for sale off vendors looking to trade up is not going to benefit the broader housing market. It will be interesting to see how lenders respond to the scheme, and indeed tax payers.”