On 12 March 2012 the Government announced the introduction of the New Buy Scheme which assists buyers who have a deposit of at least 5% to purchase a newbuild property.
The effect of this scheme is that it will make available to buyers the possibility of securing 95% Loan to Value mortgages on newbuild houses and flats.
In order to be eligible for the New Buy Scheme then a buyer must purchase a newbuild property in England, the price of the property must be less than £500,000, it cannot be a shared equity property, it cannot be a buy to let property and the buyer must be a UK citizen.
The Scheme works in that a housebuilder will put 3.5% of the sale price into an indemnity fund for each property sold through the Scheme and the Government will provide 5.5% guarantee. If then the property is repossessed the lender will be able to recover from these funds.
The benefits of the new Scheme are that the buyer is able to gain access to greater levels of borrowing, the lender has greater protection, the builder is able to sell its properties and the Government can encourage the supply of more homes.
At the time of writing Barclays, Nationwide and Natwest are lenders which are part of this scheme.
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