Examining the issue in this week’s Market Watch are:
Andy Frankish, managing director of Mortgage Talk
Robert Sinclair, director of AMI
Ben Thompson, managing director of Legal & General Mortgage Club
Andy Frankish, managing director of Mortgage Talk
The introduction of NewBuy this week is a great opportunity for first-time buyers and restricted second-time buyers looking for higher LTV products.
With pricing on the product starting at 4.29% from Nat West and Woolwich not far behind at 4.99%, this product is great news for customers.
Nationwide are the other lender to announce their product range, with Halifax and Santandar to follow in April and May.
There is no question that this presents a fantastic opportunity for the mortgage broking community, especially those with developer relationships, as this will undoubtedly give them more options to help customers that have low deposits.
Unlike previous government-backed schemes, this also gives customers the opportunity to own 100% of their home from day one.
As a broker, I am very disappointed with NatWest’s decision to go direct to customers through a call centre.
NewBuy is a product that will be widely used by the first-time buyer and I believe a fully advised sales process is really important.
With NatWest competing through their direct channel, many brokers will not be advising on this product which ultimately is not good for the customer, something that surely goes against the whole principle of what the government is trying to achieve with the scheme.
Hopefully, we will see more lenders coming out to support the scheme in the next few months, giving customers more choice and supporting the introduction to an independent broker rather than the restricted advice option offered by NatWest.
NewBuy is a welcome introduction for all parties and will go some way in easing the disappointment of the return of Stamp Duty at the end of March.
Robert Sinclair, director of AMI
The launch of the NewBuy guarantee scheme comes after a rapid development of the proposals, with strong co-operation between the bodies representing builders and lenders working well with government. The CML really shows its worth in this area.
There will be a number of groups who benefit from this scheme.
Those people looking to buy a house, who can afford it, but do not have large deposits or equity will be helped.
Builders will have more confidence that, if they build it, they can find mortgages for more people. This will encourage them to start more developments. They are putting cash into the guarantee as it helps them.
Lenders will benefit as it will allow them to lend at higher LTV with a lower cost of capital. That will give them a more balanced lending book.
Brokers will benefit if they have links to the builders that are promoting the scheme. For some time, builders have been convinced of the benefits of using brokers rather than developing closer ties with a small group of lenders, so it will directly benefit a section of the broker community.
The greater benefit is the upturn in activity, confidence, transaction levels and optimism that initiatives like this drive into the market.
There are those who will knock this scheme as it does not help all first-time buyers and does not unlock transaction chains.
However, government is intervening not to help one market but to get building, construction and building supplies employing more people.
It will help our market too. Not as directly as some might like, but with scarce resources, the government must invest where it sees the greatest likelihood of success, where it may cost them nothing.
Ben Thompson, managing director of Legal & General Mortgage Club
The NewBuy scheme has been designed to boost the construction industry and create jobs, as well as help a number of potential new build buyers get onto the property ladder where they may currently be finding it hard.
This is about boosting growth, not creating a booming housing market. By nature of the fact that it is limited to new build only, it will only assist that part of the market.
Something like nine out of ten buyers prefer to buy second hand houses, so that statistic on its own provides a clear view regarding market impact.
The positive is that the government has combined with the industry to do something, rather than nothing and this will not only positively impact builders and buyers, but have knock-on benefits elsewhere, such as employment for example.
Press awareness around the scheme will also draw out other potential buyers and get them thinking about buying a home, and maybe not a new one.
Many wannabe first-time buyers believe they simply cannot get a mortgage without a 20% deposit and we see this in various pieces of research. This move will get them thinking and, hopefully, show a few buyers that things aren’t quite as bad as they think, so let’s say this creates a small but positive ripple effect.
Having a handful of major lenders join the party in this capacity up to 95% LTV will also help.
Combined with, fingers crossed, a gently recovering economy and housing market, this could contribute in a small way to underpinning house prices. Certainly, the government will be hoping it is timing the launch of this initiative just right, for obvious reasons.
What’s in it for intermediaries?
Quite simply, it provides all of us with a really positive reason to contact existing and prospective clients.
Whether blogs, newsletters, telephone calls or good old face-to-face meetings, this initiative is relevant to many, so intermediaries ought to embrace this and use it as a catalyst for client discussions.
The new build broking market is largely occupied by specialist new build brokers. However, this scheme is more widely available, so do check in with the Council of Mortgage Lenders for more details and information – this still represents a new opportunity.
