NewBuy scheme generates just 250 sales in first quarter
Assistance for house buyers fails to ignite demand
September 28, 2012
The government’s flagship scheme to stimulate the housing market has resulted in just 250 sales in the first three months since it was launched. NewBuy allows aspiring home owners to buy a home with just a 5% deposit. The government and the house builder then share part of the risk to protect the lender from a default.
The government claimed that the scheme would help 100,000 households buy a home by 2015 but in order for this to happen, 8,000 need to be sold per quarter. What is more encouraging is that 1,300 homes have been reserved under the scheme. However, this is still well short of what is required to meet their target.
Although it is too early to write the scheme off there are major obstacles to overcome, most notably unreasonably high interest rates. Several lenders have hiked their interest rates since NewBuy was launched to levels that do not reflect the amount of risk they are taking on. Natwest’s rate has gone up from 4.29% to 4.49%, and Woolwich has switched from offering 4.99% on a two year fixed rate to 5.49% on a 3 year deal.
To learn more about the various schemes available to help home buyers read our guide here.
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