NewBuy scheme suffers a slow start as lenders are reluctant to join
In a public letter to the Telegraph, Home Builders Federation executive chairman Stewart Baseley has expressed concerns over the slow start of the government’s NewBuy scheme, and posited that the problems with the launch may be due to lenders’ reluctance to launch NewBuy products as part of their mortgage range.
Whilst Nationwide, Royal Bank of Scotland and Barclays have already launched NewBuy mortgages, other major lenders such as Santander and Lloyds have been dragging their feet on releasing these mortgages to their customers. The NewBuy scheme was designed to bring mortgage lending to a wider market, encouraging those with lower wages and in less stable financial positions, such as those looking for a contractor mortgage to apply for a mortgage which they would be able to afford and which presented less risk. The scheme means to enable buyers to obtain 95% mortgages on newly built homes, with some of the risk covered by the government and backed by lenders. Not only this, buy NewBuy intends to create over 50,000 new jobs for those in the construction industry as the move was intended to create more need for new homes around the country.
Unfortunately, as lenders are taking longer to release NewBuy mortgages than expected, the scheme seems to be taking a very long time to start up, with neither customers nor those in the construction industry seeing the benefits yet.
Lenders may indeed want to take their time to release these products, as 2012 has been a big year for changes to the mortgage industry, and has already affected a huge number of high street banks and lenders with regards to their interest-only products. Most lenders have now tightened the rules and restrictions of their interest only mortgages to a point where they are very difficult to obtain, and a number of products have been taken off of the market altogether.
With so much happening in the mortgage market it is natural for lenders to be cautious when it comes to releasing any new products, but Lloyds have promised that they are scheduled to launch their range of NewBuy products on the 16th April, with Santander following suit in May. In the meantime the government have promised to step up the scheme by approaching lenders themselves to find out their plans for releasing the products, hopefully pushing forward launches and giving the scheme the best possible start.
Article by: Susan Grant, Senior Mortgage & Financial Consultant at Contractor Mortgages Made Easy
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