Just as the number of mortgages applied for and agreed in the UK started to show overall and significant signs of improvement, air once again seems to have started to escape from the bubble. With many consumers and industry experts pointing a finger squarely at 11 Downing Street. Chancellor of the Exchequer, George Osbourne received criticism in March for executing his planned end of the Stamp Duty holiday for first time buyers, as he claimed that the scheme had been ineffective. Recent figures from The Council of Mortgage Lenders (CML) seem to indicate otherwise.Despite overall lending being down, first-time buyers in Scotland for example, not only decided to take the plunge, but also agreed the purchase of properties priced above what statistically they normally would be prepared to spend. Nearly 40% of first time buyers north of the border bought property valued between 125,000 and 250,000 – the highest percentage ever – specifically to receive the benefit of the stamp duty holiday. First time buyers also represented 42% of Q1 house purchases in Scotland, the highest figure since 2001, agreeing over 4000 mortgages. Despite a swell of mortgage applications (in Scotland at least) towards the end of the first quarter of the year, Mr Osbourne decided to to stick to his guns and pull the plug; bringing the Stamp Duty holiday to an end. This resulted in a sharp decline in agreed loans in March. Clearly, the Chancellor believed the surge of lending was, as it most likely was, a rush to beat the deadline.
So, what next?
Mr Osbourne will clearly come under pressure from the back-benches in Parliament to entice buyers into the market and especially to help first-time buyers join in. But, he will also face the task of increasing government revenues from house purchases. All this while ensuring at the same time the banks lending the money to buyers remain fluid.
The answer: New Buy.
The Governments NewBuy scheme, now available in England, is intended to ensure banks offer competitively priced mortgages to customers who have relatively small deposits. The government will then provide the banks with a guarantee on the loan. The small print – customers will have to purchase a new build property. The scheme is primarily aimed at first-time buyers. However, those wishing to purchase a second or even third home are not excluded from the scheme, provided they meet the remaining criteria. The property must be your main residence – clearly not a scheme designed with MPs in mind. Additionally, the property you wish to purchase must also not be intended as a buy-to-let. The property must be purchased for less than half a million pounds, and have been built by a house builder registered with the scheme. If you have a deposit of 5-10% you will qualify for the scheme. Be aware that the Government are only guaranteeing the banks investment, and not protecting the buyer from possible negative equity in the future.Whether the scheme will boost the market and entice first-time buyers, only time will tell. Sadly, buyers hoping to purchase an older property with charm and a hint of character will not qualify for the scheme. Presumably, the governments advice would be that you had better keep saving up that deposit!
Article written by Ant Palmer Online jounalist
Not all mortgage lenders offer mortgages for the NewBuy scheme so please contact us to find out if a mortgage is available for your circumstances.