Monday, April 02, 2012
The Treasury is in urgent talks as lenders delay the roll-out of
the Government's £1 billion NewBuy scheme
The Government is involved in last ditch talks with banks and
housebuilders to rescue the roll-out of its flagship 100,000-home
NewBuy mortgage guarantee following increasing reluctance from
lenders to back the scheme.
According to a letter written by the Home Builders Federation
Executive Chair, Stewart Baseley, to members, seen by
Building magazine, "HM Treasury and other senior
Government officials will make urgent contact with the
lenders" to get them "to implement NewBuy as a
matter of priority".
The mortgage scheme, designed to offer 95% mortgages backed by a
£1 billion Government guarantee to buyers of new build properties,
was launched with fanfare by Prime Minister, David Cameron, on 12
At the time, the Prime Minister said the Government was
"delivering on our promise to offer affordable mortgages to
buyers who might otherwise not be able to raise the money to buy a
newly-built home. This Government doesn't just talk about
expanding home ownership, we're making it happen," he
Builders involved in the scheme estimated it could raise new
home sales by up to 15%.
But just three lenders and seven housebuilders were involved in
the scheme at launch, with the promise that more would be able to
take advantage of the Government backing in the coming weeks. The
two biggest lenders, Lloyds and Santander, have not yet joined.
In his letter to members, Baseley said that the NewBuy process
"has not evolved as anticipated" with "very few"
lenders having so far contacted builders to initiate NewBuy
Under the scheme, housebuilders have to set up a fund or
"cell" with a lender before they can offer the 95%
mortgages on their homes. As these have a minimum size, smaller
builders have to join together to form so-called multi-user cells
(MUCs) before they can offer the mortgages.
Baseley's letter said that the formation of MUCs in particular
had been hit by the delay, adding to fears smaller housebuilders
would continue to miss out.
"Only Nationwide is close to establishing a MUC, and [it
has] understandable concerns about being the only MUC
available," he said.
He added that lenders were "still deliberating about the
rules for entry into their MUCs, and what approval processes they
will have, despite these being discussed extensively and, we
believe, agreed with all parties."
Nationwide Head of Mortgage Strategy and Policy, Andrew
Baddeley-Chappell, denied the lender was worried about being the
only MUC available.
He said the technical difficulties of bringing small and medium
sized builders into the NewBuy scheme were causing delays. "The
process is going to take a bit of time," he said.
The HBF and Council of Mortgage Lenders are now asking
individual lenders to accept changes to the rules in order that
more deals are signed, and were set to review the situation with
the Government on Thursday 29 March 2012.
Chris Brown, Chief Executive of developer Igloo, said: "At
the moment the situation is maximising the damage to smaller
builders as half a dozen firms are mopping up the whole first-time
A CML spokesperson said: "We recognise that a number of
builders are keen to participate as soon as possible, and we are
confident that the range of participants will grow substantially
over the coming weeks and months."
A Department for Communities and Local Government spokesperson
said: "We are all working together to expand the NewBuy
"There is real appetite from everyone to make this
innovative and ambitious scheme a success, with lenders working as
quickly as possible. We remain committed to ensuring that all
interested builders get selling through the scheme as soon as
A spokesperson for the HBF said the letter was a private
communication to lenders: "There are no deal-breakers here and
we're doing everything we can to speed the process up."