News In Focus
Government offers guarantee for new-build home loan scheme
13 September 2012
Scots trying to raise a deposit to buy a new-build home could be helped by a Scottish Government-backed mortgage guarantee scheme.
Twelve housebuilders have signed up for the national mortgage indemnity scheme, which will enable credit-worthy borrowers to access 90 to 95% loan-to-value mortgages from participating lenders to buy new-build homes in Scotland, with a maximum sales price of £250,000. More builders are expected to follow shortly.
Nationwide and the Royal Bank of Scotland are willing to lend under the scheme, developed by home-building industry body Homes for Scotland. Bank of Scotland/Halifax will offer mortgages through the scheme in the near future.
Under the scheme, builders and developers will pay a proportion of the sale price for any house into an indemnity fund which will protect mortgage lenders from losses, thereby minimising their lending risks and freeing up capital for homebuyers who are looking to purchase their first home.
If the lenders then lose money after a repossession and sale, they can be indemnified against that loss from the indemnity fund. If the fund does not hold sufficient money to indemnify the lenders, the Scottish Government will provide a further g uarantee.
It is hoped that the scheme will help up to 6,000 households gain easier access to new homes.
Homes for Scotland is projecting that the scheme has potential to generate sales of up to £1bn over three years, and could also create or safeguard 22,800 new construction jobs and over 650 apprenticeships.
Deputy First Minister and Cabinet Secretary for Infrastructure, Investment and Cities, Nicola Sturgeon said on launching the scheme in Edinburgh:
“Securing the backing of our leading lenders for this mortgage indemnity scheme is hugely significant.
“I hope this new scheme encourages lenders to offer more high loan-to-value mortgages to credit-worthy borrowers who are currently unable to put down the large deposits demanded in the current mortgage market."
Homes for Scotland Chief Executive Philip Hogg said: “The scale of the problem is highlighted by the fact that Scottish home buyers are having to find an average 25%. This equates to nearly £40,000, based on an average Registers of Scotland 2011-12 home price of £156,410 – completely unachievable for most people.
“We need new and creative ways of thinking in order to get the marketing moving again and more homes built. Only through the implementation of innovative measures like MI New Home can we ensure Scots have access to a full range of housing options.”