NewBuy Guarantee scheme to give existing and first-time buyers leg up property ladder
NewBuy Guarantee scheme to give existing and first-time buyers leg up property ladder Reuters

The government has confirmed plans to launch its NewBuy Guarantee mortgage indemnity scheme this spring to help 100,000 people buy a home.

The scheme, which will be open to both existing and first-time buyers, allows would-be property owners to put down only a 5 percent deposit on a new-build home, while the government acts as guarantor on the remaining 95 percent of borrowing.

Critics say the scheme, which is designed to kickstart the property market, is in place to support the construction industry rather than people desperate to get on the housing ladder.

It was announced in tandem with the rebooted right-to-buy scheme offering council housing tenants a discount of up to £75,000 on their homes.

David Cameron said: "Strong families and stable communities are built from good homes. That's why I want us to build more homes and I want more people to have the chance to own their own home.

"We're rebooting the right-to-buy scheme to increase discounts for two million tenants in social housing in England. And we're delivering on our promise to offer affordable mortgages to buyers who might otherwise not be able to raise the money to buy a newly built home."

The Department for Communities and Local Government said the NewBuy scheme will allow banks or building societies to lend up to 95 percent of the sale price of a brand new home.

This means that a property worth £250,000 would require a deposit of only £12,500.

Banks have been hesitant to lend to first-time buyers. Natwest, for example, will only offer a loan up to 60 percent of the sale price.

"It's no good hoping people will climb the property ladder if the bottom rung is missing," the prime minister added.