With the deadline just two and a half months away, some are wondering if participating lenders will be ready to lend within the tight timeframe.
The scheme, announced in the Housing Strategy in November and led by the Home Builders Federation (HBF) and the Council of Mortgage Lenders (CML) will provide up to 95% loan to value (LTV) mortgages for new-build properties in England, backed by a house builder indemnity fund. The scheme aims to offer homes to 100,000 first-time buyers.
The lenders who signed up to the scheme include Barclays, Nationwide and Lloyds Banking Group, who all confirmed their preparations are in progress but declined to comment on a timeframe for implementation, as did the CML.
Steven Rance, partner at Jardine Lloyd Thompson (JLT), the group appointed to manage and develop the scheme said as the administrator, it looks set to meet the deadline.
“Despite the work we’ve got to do at JLT, in terms of putting the capital structure together, keeping on top of operational flow and drafting legal agreements, we’re confident that March is a realistic deadline for the work that we have to do. However, I can understand why lenders are choosing to not give a timeline for launching because for some of them, this is their first involvement with the scheme.”
A spokesman for Nationwide said that it still has a lot of work to do but that it’s “actively moving ahead” with the indemnity scheme.
“Most of what we’re doing right now is happening behind the scenes. The fact that we already offer 95% loans to existing and first-time buyers means we’ve got a really good starting point for the process so from our point of view, we’re not completely starting from scratch.”
Similarly, Barclays confirmed that it is in a “good position” because it too has a similar model in place with its Perfect 10 product, which allows buyers to purchase a new build property at 90% LTV.
Lloyds Banking Group confirmed that it’s currently working through the “technical details of the scheme with the CML, HBF and the government,” while Yorkshire Building Society insists that it is awaiting more details on the indemnity scheme but will continue to support the government in its effort to help first-time buyers into the market.
Nigel Stockton, financial services director at Countrywide said that one of the biggest concerns over the government’s indemnity scheme is that there are no explicit details currently available about how applications under the scheme will be implemented.
So far, the Department of Communities and Local Government have confirmed that for each new build property sold under the scheme, the home builder will contribute 3.5% into the indemnity fund, with the government supporting the fund to a total of 9% of the property value.
The indemnity fund pays out to the lender if a property financed under the scheme is repossessed and there is a shortfall. Builders will take the first loss in the indemnity, with government only being called upon to pay once the builder’s fund has been exhausted.
Stockton said: “Having spoken to a number of the major lenders, they appear to be awaiting the finer details of the actual application and submission process. In addition, it is yet to determine whether any system changes are needed, which could further delay the process.
“Therefore the likelihood of when buyers will be able to access mortgages backed through the scheme is unclear. With a proposed launch date of March, implementing the scheme within the next 12 weeks seems unrealistic, with the more probable outcome that we begin to see the first few mortgage indemnity backed mortgages in Q2 or Q3.”
