Under the scheme, which was officially launched in March this year, lenders offer 95 per cent LTV mortgages for new-build properties against a mortgage indemnity guarantee funded jointly by house builders and the government.
The Government said it’s aim was to help home buyers that didn’t have a large enough deposit and on the Department for Communities and Local Government’s website it states that, “NewBuy is able to assist up to 100,000 households in buying a new home”.
But figures published by the HBF in September showed there were 1,300 reservations made under the scheme, which is due to run until 2015, within the first six months.
The HBF says market conditions and the high rates on offer to borrowers who purchase a home through NewBuy means the scheme will only reach a quarter of its total capacity by the time it draws to a close.
A Home Builders Federation spokesman says: “Realistically, NewBuy is going to be around 25,000. The Government has set aside money for 100,000 and eventually, if it extends the scheme, we will get to 100,000. But with the current climate as it is, and rates the way they are, 25,000 is realistic.”
But the new housing minister, Mark Prisk, says the 100,000 new homes figure is not a target but the maximum liability the Government is willing to accept.
Giving evidence at a Communities and Local Government select committee yesterday, Prisk said: “The 100,000 , if you like, is the Government quite rightly saying ‘ok, well we know the Home Builders Federation are saying to us they are going to do 25,000, and they may well do more than that, but we need to make sure we have a proper contingency liability here’, so we need to put that in place for up to £1bn.”
The HBF says it will also urge whichever party is in power in 2015 to extend the scheme.
A spokesman says: “We will be pushing the Government to continue with the scheme, whatever colour it may be.”
Property developer Redrow has previously warned the scheme is being undermined by high mortgage rates offered by lenders to borrowers purchasing homes through the scheme.
Earlier this month, shadow housing minster Jack Dromey told MPs at the Labour conference that NewBuy had been “ludicrously overhyped”, adding it would take 200 years to reach the scheme’s 100,000 home limit.
Speaking at a Mortgage Strategy roundtable earlier this month, Mortgage Advice Bureau new-build director Andy Frankish said: “One of the problems with NewBuy is that from the day it launched it was always on a downer, as someone said that 100,000 properties would be sold using it.
“It was never going to reach 100,000 units from day one, so that was the benchmark that was set and it was always going to fail by the measure. It was just a ridiculous figure.”