21 June 2012 | By Gavriel Hollander, Inside Housing
House builders have renewed their criticism of the government’s mortgage indemnity scheme, claiming lenders are still charging unacceptably high interest rates.
During a meeting with housing minister Grant Shapps and business secretary Vince Cable, major contractors once again said that the Newbuy scheme was failing because lenders had not reduced their rates, despite government and house builders stumping up money as a guarantee against default.
‘There was some criticism of the scheme and the lenders’ reaction to it, in particular the price of the product,’ said a source who attended yesterday’s meeting.
‘They [the mortgages] are priced as if they are 95 per cent [loan to value] mortgages whereas they should be priced as if they are 85 per cent. That was a big issue for the house builders.’
Under Newbuy buyers of homes built by builders who are signed up to the scheme are able to put down deposits as low as 5 per cent of the value of their homes to access mortgages from participating lenders. A government-backed guarantee scheme, into which builders and the Treasury put a combined total of 9 per cent of every home’s value, in turn provides security for the lenders.
Several leading builders are taking part in the scheme, alongside five lenders – Barclays, Halifax, Nationwide, Natwest and Santander. However, they have already come under fire for offering loans at up to 6 per cent, despite the government guarantee.
Yesterday’s meeting at the Department for Business, Innovation and Skills was hosted by the government’s construction adviser Paul Morrell and attended by representatives from Affinity Sutton, London & Quadrant and Places for People as well as a number of house builders, the Home Builders Federation and Homes and Communities Agency.
The meeting was intended as ‘a listening exercise’ to establish what the barriers are to upping the production of new housing. However, it is understood that there was no discussion of a plan
mooted by Mr Cable earlier this week to offer government guarantees to investors looking to inject capital into house building projects.
Among topics discussed were the need to encourage local authorities to release public land and for clarity around the application of the National Planning Policy Framework. There was also discussion of how to attract institutional investment into house building.
One attendee said: ‘I get the impression that the government would like a private sector solution without public sector expense, but I don’t think that is possible.’