NewBuy 25% more expensive than renting, says Hometrack

Thursday 24th May 2012

New figures released by the Home Builders Federation reveal that 400 people have reserved homes through the NewBuy scheme.
 
With the home-buying process taking some weeks, the Home Builders Federation said that the figures reveal a ‘remarkable start’ for a scheme only introduced on March 12 and expected to deliver tens of thousands of sales over the next three years.

Last week, it was reported that only five property sales had actually been completed using NewBuy, the 95% mortgage scheme which is jointly underwritten by taxpayers and developers.

The Home Builders Federation is having to fight off persistent controversy over the NewBuy scheme, which it helped to create, because of high interest rates.

Property analyst Hometrack is the latest to air its concerns, saying that not only are NewBuy mortgage rates expensive compared with other mortgages, but they are also 25% more expensive than renting, and also more expensive than buying via the FirstBuy shared equity scheme.

Hometrack warned: “NewBuy will certainly help boost visitor numbers to sites but its success will depend on local market dynamics and whether would-be buyers are willing to pay a premium to realise the aspirations of home ownership.”
 
The 400 figure was announced as official statistics reveal a 15% drop in housing starts in Q1 of this year compared to Q1 of 2011 to just 24,140.

The Home Builders Federation said: “At a time when we are already building fewer homes than since the 1920s, and fewer than half those required to meet housing need, the figures further emphasise the value of NewBuy to home buyers, the industry and the economy.
 
“Around 60,000 starts per quarter are needed to meet housing demand. The country is facing an acute housing crisis, with millions on social housing waiting lists and first-time buyers unable to buy, largely because they can’t afford the deposit required to secure a mortgage.”
 
Stewart Baseley, executive chairman of HBF, added: “Reaching 400 NewBuy reservations within weeks of its launch is a fantastic start and clearly demonstrates the customer demand for this vital scheme. These figures make us very confident that the scheme will deliver tens of thousands of sales over the coming years.
 
“As the latest house-building statistics show, we have an acute housing delivery problem. By enabling home buyers to purchase a new home, NewBuy will kick-start new home construction, creating economic growth and thousands of jobs across the country.”
 
So far, there are 13 builders registered with NewBuy – with eight more currently going through the registration process – and five lenders. The scheme has, however, been dogged with controversy because of the high rates – at around 6% – being charged by NewBuy lenders.

The rate compares with a 90% mortgage deal from HSBC available to first-time buyers, which offers a discounted rate for two years of 3.84%. There are no arrangement fees and after two years the rate reverts to the lender’s Standard Variable Rate.