Earlier in the week, Prime Minister David Cameron and his deputy Nick Clegg unveiled their “help people to get on the property ladder”
plan in order to boost the subdued market activity within the housing market and help those who cannot find enough cash to buy a property by encouraging first-time buyers to take 95 per cent mortgages. The initiative will allow up to 100,000 first-time buyers to purchase a new build property with just 5 per cent deposit, with the security of the loan provided by the Government and housebuilders. Therefore the lender will be able to recover any losses if the property is sold less than the outstanding mortgage amount.
The scheme which is said to be launch in Early 2012 will encourage lenders to offer mortgage products with higher LTV’s, with Nationwide already announcing that it would be taking part in the proposed scheme. This should lead to increased amount of applicants seeking high LTV mortgage products from us as a large London Mortgage Broker.
Alongside the scheme, the government will also inject £400 million of tax payers’ money into subsidies for housebuilders to construct 16,000 new homes on sites which have already been improved planning permission. The government will also introduce new proposals to allow increased discounts under the Right to Buy scheme, giving social tenants the opportunity to buy their home for up to half its value. Receipts from the additional Right to Buy sales will be used to support the funding of new affordable homes for rent on a ‘one on one’ basis, which is said to develop 100,000 new homes and support 200,000 jobs.
The Indemnity Scheme for first time buyers was welcomed by the Council of Mortgage Lenders (CML), which said that it should allow mortgages up to 95 per cent LTV more available on new build homes. Paul Smee, from the CML said “This scheme is good news for home-buyers, developers and indeed the UK economy. Lenders will be able to reduce the level of deposit needed by home-buyers in the new-build sector, enabling more buyers to buy and so supporting the flow of new housing development, with all its positive consequences for jobs and the economy as a whole.” The CML also added that lenders will not be compromising the quality of their lending or taking on increased risk though the scheme.