Redrow property developers says the Government’s NewBuy scheme is being undermined by higher rates from lenders.
In the group’s latest financial results, criticism is levelled against lenders for failing to bring down higher LTV rates to reflect the risk profile of the NewBuy scheme.
The report says: “The initiative has been strongly welcomed by the industry; unfortunately, however, the rates being offered by lenders still do not reflect the lower risk profile of the scheme and as such NewBuy has not yet enjoyed the success it deserves.”
“The take-up so far has been disappointing with just 63 customers choosing to use the scheme with many more discouraged by the high interest rates charged by most of the participating lenders.”
A spokesman for the Council of Mortgage Lenders says: “Lending rates need to reflect all the risks that are associated with higher LTV lending and there are some risks that are not covered by this scheme. Two principle risks include the risk of default and the losses that might arise from the default. Losses from default will be covered in most cases but may not necessarily be fully covered.The risk of loss itself isn’t covered and that is something a lender has to take into effect when pricing the products.”
Barclays, Halifax, NatWest, Santander, Aldermore and Nationwide currently offer NewBuy mortgages, providing a 90 per cent to 95 per cent LTV mortgage for buyers.
Aldermore currently offers two and three-year fixed rates at 5.48 per cent. Halifax reduced its NewBuy 95 per cent LTV by 0.10 per cent to 5.89 per cent in July.
Barclays reduced its three-year fixed rate NewBuy mortgage by 0.2 per cent, from 5.69 per cent to 5.49 per cent in September. Natwest has a two year fixed rate product at 4.49 per cent and a five year deal at 4.79 per cent.
Nationwide has three-year fixed rates starting at 5.49 per cent and five-year fixed rates starting at 5.59 per cent for new borrowers.
Santander reduced its NewBuy mortgage rates by up to 0.7 per cent in August. The lender’s three year fixed rate was reduced from 5.49 per cent to 4.99 per cent, while its five-year fixed rate was cut from 5.49 per cent to 5.29 per cent and its seven-year fixed rate was reduced from 5.99 per cent to 5.29 per cent.