Rising mortgage rates undermine plans to boost home-ownership.

Rising mortgage rates are beginning to impact upon David Cameron's plans to boost house building and home-ownership.

As lenders signed up to the NewBuy scheme have already started to increase their mortgage rates, the scheme could be in jeopardy and buyers could still find themselves priced out of the UK housing market.

The Government NewBuy scheme hailed by Cameron as a vital boost to the property market, could be set to fail unless more high street lenders sign up and offer competitive rates. The scheme is already restricted by the number of lenders offering mortgages and house-builders affiliated to the scheme, rising rates just restricts availability further.

At the time of the launch it was thought the scheme could potentially offer a huge boost to house building, but the verdict so far according to Steve Morgan of Redrow is 'disappointing'. He has said that lenders increasing their NewBuy mortgage rates is not helpful to house-builders, property buyers or the economy.

This is of concern to 10 Downing Street as housebuilding was a large factor in economic recovery after the Depression of the 1930s. The Chancellor is keen to keep Britain building homes.

Mike Farley who is the chief executive of Persimmon one of the house-builders signed up to the scheme, advises that he believes the scheme could work providing the lenders signed up drop their mortgage rates. He added that to make the scheme work lower rates are needed or would-be buyers will be priced out.

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