Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Just 250 purchases completed through NewBuy

New figures released today show that 250 homes have been purchased under the NewBuy guarantee scheme in its first quarter, falling far short of industry and government hopes.

The Department of Communities and Local Government hopes the scheme, which launched on 12 March this year, will help “up to 100,000 households” in buying new homes.

The government has set a maximum liability of £1 billion, but currently is only exposed to £2.5 million as of 30 June, showing how far the scheme must expand to meet expectations.

However, the Home Builders Federation recently reported that 1,500 reservations had been made, with a spokesman telling CN uptake had been improving in recent weeks and could be expected to accelerate as more lenders and builders get on board.

“At current rates, NewBuy is not the answer”

John Tutte, Redrow group managing director

NewBuy was hoped to loosen up credit availability for purchasers of new-build homes, enabling them to obtain mortgages with 5 per cent deposits underwritten by the government.

Under the scheme, developers also contribute a percentage of the value of the NewBuy homes in order to protect the lenders against default.

But some large developers remain unconvinced, with calls for more competitive interest rates and for the scheme to be extended to second-hand homes.

Redrow group managing director John Tutte recently attacked the scheme, saying take-up had been “disappointing” and “slower than expected”.

He added that although the scheme “certainly has the potential” to address deposit problems, interest rates until now “have certainly been too high”.

“NewBuy should be a solution for those wanting to trade up who can afford to pay a bit more but do not have sufficient equity in their existing homes to pay a large deposit,” he said.

“Unfortunately for them, at current rates, NewBuy is not the answer.”

A DCLG spokesman said that the figures “do not reflect the real progress” of NewBuy, as the average house sale takes up to six months.

He cited the HBF’s promising report on reservations using NewBuy, saying that “at least 25,000 additional new homes will be built as a direct result of the scheme”.

He added: “This demonstrates that aspiring homeowners are recognising the opportunity the scheme gives for them to buy a newly built home with a fraction of the deposit normally required, but also how NewBuy will help to get Britain building.”

Other signs that the scheme may be gathering momentum came this week as Halifax extended its seven-year mortgage to NewBuy at 95 per cent loan-to-value.

Aldermore was also recently named as the first ‘challenger’ bank to join the scheme, aiming to compete with the quintet of Halifax, Santander, Natwest, Nationwide and Barclays.

And more builders are signing up to the scheme, with more than 30 now in the fold as opposed to just seven at the launch.

As of the end of June 2012, no costs had been incurred to the government through the scheme.

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Links may be included in your comments but HTML is not permitted.