NewBuy mortgage guarantee scheme unveiled by Schapps

A new government mortgage indemnity scheme has been announced that will provide a guarantee for 95 per cent mortgages up to a maximum loan level of £500,000. The government scheme is aimed at re-starting the property market.

The government's NewBuy scheme is to be launched this March and, has been designed to allow lenders the ability to offer larger mortgages on developers newly built homes without their having to accept all of the financial risk. The government will guarantee that lenders will not lose money should the mortgaged property drop in value and suffer repossession.

The new mortgage indemnity scheme is to be funded by both the taxpayer and property developers and is aimed at getting more first-time buyers into their own home. Grant Shapps said that the government wants to help more first-time buyers and, under the new scheme buyers with as little as £10,000 should now afford a deposit to buy their own home.

The proposed scheme is to be open to all borrowers and will not be restricted to just first-time buyers for all new-build property up to a maximum value of £500,000. The only restriction is that borrowers have to be British citizens and any newly purchased property has to be the borrower's primary residence.

There are only weeks until the scheme launch which is intended in March 2012 however, the Nationwide BS is said to be still working along side the government in trying to work out the final details on how the scheme will operate. The CML advise that they too are in discussions on scheme details and warn that when the scheme details are announced it is likely that the maximum £500,000 cap level may vary around the country.