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NewBuy mortgage scheme to help first-time buyers

Government mortgage indemnity scheme launched

House builder in front of part-built new home

The government’s new mortgage indemnity scheme, NewBuy, aims to help first-time buyers onto the property ladder

The government has announced a new mortgage indemnity scheme, NewBuy, aimed at helping first-time buyers onto the property ladder and existing homeowners up the ladder.

With many potential buyers struggling to be approved for affordable mortgages with a high loan-to-value, the new scheme is designed to part-guarantee mortgages of up to 95% of the home value.

How will the NewBuy scheme work?

Home builders and the government will act as co-guarantors on part of the loan. The house builder will put 3.5% of the sale price into a ring-fenced account for seven years.

The government will guarantee an extra 5.5%, which will be used to compensate lenders if they have to repossess the home and sell it for less than the mortgage value. This is only expected to come into action if there is a new property crash.

The NewBuy scheme is supported by Barclays, NatWest and Nationwide, and will help people to borrow up to 95% of the value of new homes. NewBuy is expected to give a boost to home-building, but is only available in England and only on flats and houses worth up to a £500,000.

Prime Minister David Cameron said: ‘We’re delivering on our promise to offer affordable mortgages to buyers who might otherwise not be able to raise the money to buy a newly built home. It’s no good hoping people will climb the property ladder if the bottom rung is missing.’

Barclays announces NewBuy mortgages

Barclays has today announced NewBuy mortgages available on new homes from builders Bovis, Barratt, Bellway, Redrow, Persimmon and Taylor Wimpey.

According to Barclays, a typical first-time buyer purchasing a new home with a participating builder at £180,000 and requiring a 95% loan-to-value mortgage of £171,000 would pay £998.65 per month on a 25-year repayment basis. That’s if they take out Barclays’ two-year fixed-rate deal at 4.99%.

Nationwide NewBuy mortgages

Nationwide Building Society has also introduced a NewBuy mortgage range, including a three- or five-year fixed-rate mortgage at 95% loan-to-value (LTV).

The three-year fixed-rate deal has an interest rate of 5.69% with a £900 product fee and £99 booking fee. The product fee is reduced to £400 for first-time buyers. A product fee-free option is available at 5.99%.

The five-year fixed-rate deal charges 5.99% (95% LTV) with the product fees shown above, or 6.19% without.

NatWest NewBuy mortgage offer

NatWest will offer 95% mortgages on properties built by Barratt, Bellway, Bovis, Linden Homes, Persimmon, Redrow and Taylor Wimpey. 

Its first mortgage product has an interest rate of 4.29%, fixed for two years, while its second has an interest rate 4.99%, fixed for five years. 

Need mortgage advice?

We believe you should seek independent mortgage advice before taking out a mortgage. The Which? Group offers an independent mortgage advice service, Which? Mortgage Advisers, that looks at every mortgage from every available lender. You can also find an independent mortgage adviser using the Unbiased website.

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