DCLG calls for one year review of NewBuy
The Department for Communities and Local Government committee has recommended the government reviews the NewBuy scheme after the first year of its operation.
The review would be used to assess how many properties sold under the scheme have fallen into negative equity and the impact this has had on buyers.
It will also assess the impact of the scheme upon mortgage finance in other parts of the market.
Peter Williams, director of the Cambridge Centre for Housing and Planning Research and executive director of the Intermediary Mortgage Lenders Association, gave evidence the day the scheme was first announced.
He said: “Both this and right to buy are new priorities but actually it will mean less mortgage finance out there in the rest of the market to support other things.”
The DCLG committee also recommended to the government to bring forward changes to the NewBuy scheme to allow small builders to become fully involved in the scheme.
Currently a builder has to build an absolute minimum volume of 100 units per annum to establish a “cell” with a lender on its own.
The Local Developers’ Forum claimed that as a result of this around 40% of builders could be excluded.
Giving evidence to the committee in December 2011 Paul Smee, director general of the Council of Mortgage Lenders, said that there was already interest in the scheme from smaller lenders and that it was possible to “envisage situations where smaller builders with perhaps strong regional presences are talking to lenders with equally strong presences, which gives a local flavour to the scheme.”
The DCLG said it considered it important that local builders have the opportunity to be involved in the scheme.
The committee suggested government should promote opportunities for smaller builders and lenders to work together.
DCLG also looked at the merits of introducing a version of the NewBuy Guarantee to underwrite investment in shared ownership and shared equity mortgage products.
The committee recommended that the government bring forward proposals to establish such a scheme, making clear that it would only be provided if a number of steps were followed to make the product more transparent for the consumer.
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