Croftons Solicitors LLP

As part of the government’s “new” housing strategy the ability to obtain mortgages at 95% of market value on new builds is part of the strategy which claims to  “tackle the housing shortage, boost the economy, create jobs and give people the opportunity to get on the housing ladder.”

Of course the burden attached to the new scheme falls with the purchaser as the new scheme  guarantees lenders against their losses if borrowers default. On a repossession, if the market value is less than the amount due under the mortgage the lender will be able to reclaim 95% of its losses.

The lender can reclaim this money because it is held in an ‘insurance pot’.

The developer of the new property will pay a sum equivalent of 3.5% of the selling price of the home to the lender, which will be held for seven years. The government also guarantees a further 5.5% of the sale price against loss by the lender.

So, 9% of the sale price will be in an insurance pot.

Under the terms of the scheme, the lender will have insurance for 95% of its loss if the borrower defaults.

Some banks have already signed up to the scheme, including Barclays, HSBC, Lloyds Banking Group, Nationwide, RBS, Santander and, Yorkshire & Clydesdale Banks.

The developers to put their names down include Barratt Developments, Crest Nicholson, McCarthy and Stone Retirement Lifestyles, Bellway, Fairview New Homes, The Miller Group, Bloor Homes and, Galliford Try.

Now, if only mortgages to assist buyers purchase shared ownership properties were more readily available…
Lucy Worrall, Partner

Twitter; @lucyVworrall

Email; lworrall@croftons.co.uk

Posted on 01.12.11

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