New scheme aims to help housing market

A new scheme has been launched by the government to give a shot in the arm to the beleaguered housing market.

The NewBuy Guarantee Scheme, which was announced last year but now comes into effect, is aimed at helping as many as 100,000 would-be buyers purchase a new-build property with a deposit of as little as 5% as opposed to the 20% which is usually required.

The scheme, which is backed by the Home Builders Federation and the Council of Mortgage Lenders, had been intended to assist first-time buyers only but has been extended to include all those hoping to move home. It would apply to flats and houses up to a value of £500,000 and would see developers contributing 3.5% of the purchase price with the government guaranteeing 5.5%.

There are fears that lenders will not throw their weight behind the scheme while concern has also been raised about recent rises in mortgage rates which could deter would-be buyers from getting involved. It is also thought that people with a poor credit history will not benefit as they would be subjected to the same checks as they are with mortgages generally.

However, the Council of Mortgage Lenders believes the scheme will get the support it needs from the lenders to ensure it is a success. A spokesman said: “This is part of a wider approach to stimulating demand in the economy and it is part of a growth package and a series of measures.”