With parallel mortgage indemnity schemes announced north and south of the Border, my vote for the catchiest name must go to the Homes for Scotland initiative, Mi New Home. It’s inviting, feels warm and comfortable and suggests ease of access. So full marks. Not that the English scheme’s by line is far behind, Newbuy is presumably also what it says on the tin.
According to its web site, the concept of the Mi New Home dates back to June 2011 and since then has acted as the basis of the NewBuy Scheme announced by Westminster last November. Passing swiftly over any hint of political rivalry, both schemes are to be welcomed and re-assuring that this new opportunity to give a helping hand to buyers of new build properties is available in both jurisdictions.
Here are the common features of both schemes;
- The scheme is available to potential buyers of new homes constructed by participating house builders where mortgages are sought from participating lenders.
- Under both schemes, buyers will be able to access 95% of the value of the new build property up to £250,000 in Scotland and £500,000 in England.
- The mortgage is indemnified through the house builder locking away cash indemnities of 3.5% of each of the property’s sale price in an established insurance company or fund which will then be backed by a Government (Scottish and Westminster) guarantee of 5.5%.
- In the event that a house within the scheme is repossessed and sold at a loss within a seven year period following the sale lenders will receive compensation. The English scheme is so far the more detailed with the builder’s stake being accessed first but it is likely the Scottish scheme will operate in the same way.
In England it is not available for shared ownership or shared equity or for second home owners and buy-to-let investors.
So who will benefit most?
The glib answer to that question might be “does it matter” so long as sectors players do stand to gain an advantage. But it’s perhaps not surprising how often new innovative schemes attract a negative as well a positive reaction where scarce government subsidy has to satisfy a diverse and increasing housing shortage.
On the upside, and clearly being developed by Homes for Scotland, house builders will be a main beneficiary. It is estimated that in the 3 years the scheme is intended to run, it could create or safeguard around 22,800 new construction jobs and 650 apprenticeships stimulating the wider economy and increasing Scotland’s housing supply. That is a truly good news story matched only by the anticipated 6,000 first time buyers and others of new build homes who are expected to use the scheme to get a helping hand onto the first rung of the new build Housing ladder. The social and environmental impact of new build housing investment are equally material and can be life changing for individual families.
However, as with the National Housing Trust initiative, there is some scepticism that the new homes will not really be additional, that house builders can choose which homes to include in the scheme and will be free to fix their prices knowing there are willing and able buyers. In other words schemes like this interfere with the free market and prevent house prices settling at an affordable level.
Again, is the scheme just another example of unfair preference being given to house builders with second hand sale homes suffering whilst their tax paying owners are paying for their competitors’ scheme?
Once again does the scheme creates unfair discrimination against small house builders and there would appear to be no role for social landlords
To what extent the Government guarantee will be called on, when tax payers money would be actually lost, will depend on variable unknown factors including a general house price fall of around 8% according to some analysts so hopefully the scheme is about confidence building as well as house building.