Britain launched a scheme on Monday to help homebuyers borrow up to 95 percent of the value of a new property, to boost the flagging housing market and construction industry. The 'NewBuy Guarantee' scheme, intended to help first-time buyers and existing homeowners, is supported by the banks Barclays, Nationwide and Royal Bank of Scotland unit Natwest.
The government hopes the initiative will help up to 100,000 people to buy a newly built home with a deposit of 5.0 percent or 10.0 percent of the value of the property, rather than the 20 percent which is usually required by banks. Under the plan, property developers will contribute 3.5 percent of the purchase price and the government will put up 5.5 percent. The scheme is available on apartments and houses up to a maximum value of £500,000 (596,137 euros, $781,666) in England only. In the event of repossession, lenders will be able to recover any losses from the borrower's deposit and the developer's contribution, and will then be able to call on the state guarantee.
"We want to help everyone achieve their aspirations, and feel the pride of home ownership," housing minister Grant Shapps said in an official statement. "So I'm delighted that from today the 'NewBuy Guarantee' will give thousands of prospective buyers the chance to buy a home with a fraction of the deposit normally required."
The Conservative-Liberal government on Monday also announced plans to relax restrictions on its 'Right to Buy' scheme, under which social housing tenants can purchase their property at a discount. NewBuy meanwhile has been designed by private-sector organisations the Home Builders Federation and the Council of Mortgage Lenders (CML). However, some analysts expressed doubts about whether the scheme would help reboot the market. "The property market will come back when it is ready to come back and schemes like this are mere tinkering around the edges," said Jonathan Samuels, chief executive of Dragonfly Property Finance.
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