The NewBuy scheme was launched by the government and so far, five lenders have joined under the scheme. However, a sixth has recently become involved -Aldermore. Aldermore is a newcomer to the mortgage markets, and joins other major players such as Halifax, Santander, NatWest, Nationwide and Barclays.
The idea behind the government NewBuy scheme is that it is going to allow people to get mortgages with a higher loan to value ratio, meaning that in some instances up to 95 percent of the value of the property can be borrowed. This scheme has been put into place in order to help people who were unable to enter the property market, because they were unable to afford a deposit. With just five percent of the property value having to be put forward, this is going to allow a larger number of mostly first-time buyers to purchase homes.
There are some conditions for buying a property with this kind of mortgage, such as that it has to be a new property, either a flat, or house. Both parties which are involved in the lending have to put money aside in a fund, which can be accessed by the lender if any losses are to be suffered. This is an intelligent form of providing a guarantee, so that lenders are happier to offer a larger amount of money on a property’s value than they normally would.
The whole scheme has been put together in order to allow people to raise the deposit to purchase a home. It is particularly targeted at people who are looking to buy a home for the first time. Additionally, it is also clearly aimed at people who want to move up the property ladder and purchase a larger home, even if they have limited equity in their current property.
The scheme was first unveiled in March, and since then, uptake has been rather slow. At first, only three lenders signed up for the scheme, but since it has proved to be quite effective, other lenders have jumped on board.
Aldermore Financial Solutions are offering two major deals to potential consumers through the scheme. The first is an option to have a fixed rate mortgage of 5.48 percent, for up to 3 years, with a fee of just under £1000. This deal is available to people who want to buy properties valued up to £500,000.
The advantage of this deal is that the deposit can be gifted by a family member, as long as a rental history of the past 12 months can be put forward showing that the person is reliable.
When this deal stacks up to others available on the market, it seems to be in the middle of the field; not an exceptionally good deal, but by no means the worst available. Currently, NatWest offer the best deal, with a mortgage rate of 4.49 percent on the scheme, which makes the offering from Aldermore about one percent more expensive. In addition, the mortgage from Aldermore also comes with a fee, which is not the case with NatWest.
Santander also have a very competitive offer which beats Aldermore, with a fee of just £100, and a fixed rate of 4.99 percent. This is a signal that the scheme by the government is picking up momentum, and the number of lenders willing to embrace the scheme is increasing. However it is still a long way towards the goals that the government has set to achieve.