Still shortage of affordable mortgages – house giant

Hope: The NewBuy scheme could see the return of 5% deposits
Hope: The NewBuy scheme could see the return of 5% deposits
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Housebuilder Bellway has warned there is still a shortage of affordable mortgages despite a new Government-backed scheme to boost availability.

The group yesterday said the availability of higher loan-to-value mortgages “remained restricted” despite the recent launch of the Government-backed NewBuy scheme to encourage lending on newly built homes.

The UK’s fourth biggest housebuilder said the scheme is unlikely to have a significant impact on the number of completions in the current financial year, but hopes it will help support sales in its next year, starting in August.

The warning came as it revealed that pre-tax profits rose 69% to £40.6m in the six months to January 31 as it focused on building traditional homes because flats are more exposed to first-time buyers who are struggling to get on the property ladder.

The group made a good start to the spring season after further increases in reservation rates in the past six weeks, although this was likely to have been boosted by the recent end of a stamp duty holiday for first time buyers.

The NewBuy scheme, launched earlier this month, is forecast to help as many as 100,000 people locked out of the property market by heralding the return of 5% deposits rather than the 20% typically demanded by lenders since the credit crunch. The Government will stump up 5.5% of the value of a mortgage on a home worth up to £500,000 in England, while the housebuilder will put up 3.5% to help guarantee mortgage lenders against any losses and stimulate a wave of fresh lending.

It is hoped more cheap mortgages will become more readily available as more products are put on the market through the scheme.

Three major mortgage lenders – Barclays, Nationwide Building Society and NatWest Home Loans – have already said they were ready to start lending under the scheme.

Halifax is expected to follow suit soon, and Santander aims to make products available by the middle of the year.

Bellway chairman Howard Dawe said: “The availability of affordable, higher loan-to-value mortgage products has so far remained restricted.

“We are, however, hopeful that the government’s NewBuy initiative will assist in underpinning future sales rates, although this is unlikely to have any significant effect on the number of completions for the current financial year.”

The Newcastle-based firm also reported its average selling price rose 8.5% to £182,753, helped by its focus on family homes.

It was helped by a strong performance in the south of England, where the number of homes sold was up 12%, compared to a slight decline in the north.

Profits were also boosted after it bought cheaper land in the wake of the recession.