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UK's biggest housebuilder sells just 220 homes under Government's 'affordable' scheme

30th August 2012


The NewBuy Guarentee scheme was launched in March by the Government to help 100,000 people buy their “dream home”. Under the scheme, would-be buyers are able to acquire properties with a deposit of just 5 per cent, with the Government and housebuilders underwriting the mortgage.

At the time of the launch David Cameron, the Prime Minister, said that the scheme would "unblock" the moribund housing market.

However Persimmon, the country’s biggest housebuilder, said yesterday that it has sold only 220 new homes under the scheme in the five months since it launched.

Mike Farley, Persimmon’s chief executive, said that NewBuy had got “off to a slow start”.

His comments echo those of Bovis Homes, another of the UK’s biggest housebuilders, which said earlier this week that it was making sales of just three or four houses a week under the NewBuy scheme.

Bovis said that it has sold a total of 70 homes under the scheme.

NewBuy was launched in March in order to boost flagging house sales, particularly at the lower end of the property market. By letting people take out mortgages at 95 per cent loan-to-value on newly-built properties worth up to £500,000, the Government hoped it would stimulate the market.

At the time Grant Shapps, the Housing Minister, said that by reducing the deposit required to buy a home from around 20 per cent to 5 per cent, people who would “otherwise be frozen out of the market” would be able to afford properties.

The scheme meant that a typical buyer would require a £10,000 deposit to buy a £200,000 house rather than a £40,000 deposit, according to the Department for Communities and Local Government (DCLG).

However housing experts said that people were put off using the scheme when it launched because the interest rates being offered by mortgage companies for NewBuy purchases were too high.

Although lenders were willing to accept lower deposits from buyers, interest rates of around 5 per cent were deemed unattractive by purchasers.

Persimmon’s Mr Farley said it is “no secret” that housebuilders were disappointed with the interest rates being offered.

However he said that recent reductions in mortgage rates should boost the scheme in the months ahead and that it is “early days yet” for NewBuy.

James McAuley, head of new homes at LSL, the estate agent group, said that take up of NewBuy has also suffered due to lack of marketing and awareness among the public.

“The [housing] developers themselves are advertising it but there is not the awareness among buyers. It was well received by the development community when it was announced, but it is an awareness thing.

“There is a view that the mortgage rates being offered could have been too high,” he said.

A DCLG spokesman said that it is happy with progress.

"We are encouraged that just 6 months after the launch of the NewBuy Guarantee scheme, Persimmon have already sold over 200 homes - especially with sales of new build properties typically taking as long as that from reservation of the property to completion of the sale.

"Persimmon are just one of many builders involved in the scheme, and with the Home Builders Federation reporting as many as 600 reservations we expect many more sales to complete in the coming months."

Source:  Telegraph 30/8/12