NewBuy homes scheme 'hit by high mortgage rates'

By Daniel Culpan

A major builder has said that a Government-backed scheme designed to help homebuyers with smaller deposits get a new-build home has been affected by the high mortgage rates offered by lenders, the Independent reports.

Since the NewBuy mortgage indemnity scheme was unveiled back in March, Redrow has attracted just 63 homebuyers. It said the initiative was not as successful as it should be because the interest rates offered by lenders didn't take into account the lower risk profile of the scheme.

Redrow told investors: "The take-up so far has been disappointing, with just 63 customers choosing to use the scheme with many more discouraged by the high interest rates charged by most of the participating lenders."

The NewBuy initiative is aimed at people looking to get on the property ladder, or who already own their own home - but can only afford to put down a 5-10% deposit. The idea is that developers put 3.5% of the total value of every NewBuy property they sell into a pot, which would be used to financially protect the lender should the mortgage borrower default.

Furthermore, the Government has guaranteed the scheme in the event that this financial safety net isn't enough to cover a lender's losses.

Tags: mortgage, mortgages, mortgage application, first-time buyers, housing market, NewBuy, borrow, deposit

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