In response to the property crash the Government has launched two new programmes which are aimed at increasing the number of home owners in the UK. The first of these initiatives, The Right-To-Buy Scheme, will make it easier for council residents to buy their homes at a discounted rate of up to £75,000. However, the second programme, the NewBuy scheme, has received the majority of press attention today.
Under the NewBuy scheme first time buyers will be able to secure deposits for properties with a minimal sum of 5% of the overall capital value of the property. Some of Britain’s largest lenders, including Barclays, Nationwide and NatWest, have signed up to the programme. David Cameron has stated that the Government is fully behind the programme, and that it will help first time buyers enter the property market and encourage growth in the construction industry. The NewBuy scheme however has received criticism for being too risky by creating ‘instant negative equity’ whereby new builds will instantly lose their value the moment the new owners put their keys in the front door.
Mark Harris, chief executive of mortgage broker SPF Private Clients, has stated that the low interest rates offered under the scheme may not be a good investment in the current climate, as interest rates are not expected to rise in the near future. According to minutes published by the Bank of England’s Monetary Policy Committee . Another issue with the scheme surrounds a possible property crash which could dramatically de-value property and make it difficult for first-time buyers to re-mortgage these properties, meaning many first-time buyers could see their “monthly payments spiral upwards”. In response to the scheme, the Shadow Housing Minister, Jack Dromey stated that it was “too little too late”.
