The Council of Mortgage Lenders is urging to Government to extend NewBuy beyond 2015 when the Budget is announced later this month.
The scheme, which launched in March 2012, got off to a slow start but transaction numbers picked up with 1,500 completions registered at the end of 2012. In Q4 900 homes were bought through the scheme, more than twice as many as in the previous quarter.
NewBuy has the capacity to help 100,000 borrowers get onto the housing ladder but commentators have suggested the scheme will help around 25,000 to 30,000 borrowers purchase a home.
However, the trade body is “concerned” the scheme will not reach its full potential unless it is extended beyond 2015.
In its fortnightly newsletter, News & Views, published last week, the CML says: “Given that NewBuy and similar initiatives in other countries take time to gain momentum, we are concerned that closure of the scheme in 2015 could come just as it is beginning to yield the strongest results.”
The CML is also urging the Chancellor to abolish stamp duty on NewBuy transactions.
Stamp duty is currently levied on properties over £125,000 but borrowers are allowed to purchase properties worth up to £500,000 through NewBuy, meaning many people will have to stamp duty as they will pass the threshold.
The trade body says: “Given that NewBuy allows access to home-ownership for borrowers with a deposit of only 5 per cent, we believe the government should look at the anomaly that means that many of these buyers are taxed on their purchase because it is captured by stamp duty.”