The government recently launched its NewBuy Guarantee scheme to help first-time buyers.

The idea of the scheme is to help first-time buyers or existing homeowners who want to buy but only have a small deposit or those who wish to move into a new-build property.

Since the ‘credit crunch’, many banks have required borrowers to put down a deposit of 10% or more and the better rates have needed a 20% deposit or more. This scheme allows some borrowers to get an affordable mortgage with a deposit of just 5%.  Having a 95% mortgage, however, does put them in danger of negative equity should house prices fall even a little.

Who is eligible?

To be eligible for the NewBuy Guarantee, borrowers must be buying a new-build property in England. The builders or developers must also have signed up to the scheme. While the scheme is aimed primarily at first-time buyers, other buyers are not excluded if:

• the property is their main home;
• they are British or have indefinite leave to remain in Britain;
• Their deposit has been saved without help from a public or local authority;
• The property purchase price is under £500,000.

What lenders and deals are available?

Three lenders, Barclays, Nationwide and NatWest, have already launched NewBuy Guarantee deals. Other lenders including Halifax and Santander are expected to follow suit.

The rates being offered are fixed rate and competitive compared to the few other 95% deals that are available in the market. However, the downside of a fixed rate is that the deals often come with early repayment penalties.  The NewBuy Guarantee scheme is also available for those needing only a 90% mortgage.

Information supplied by Whathouse.co.uk.