Two schemes designed to lead to the building of thousands of homes were unveiled this week by housing minister Grant Shapps.
New homes built by Barratt, Bellway, Bovis, Persimmon, Redrow and Taylor Wimpey will qualify for mortgage deals from Barclays, Nationwide and NatWest, while Crest Nicholson are also expected to sign up for the scheme.
Shapps unveiled the NewBuy Guarantee, undertaking to enable an estimated 100,000 prospective and existing homeowners to buy a home with much smaller deposits than currently required.
At the same time, the minister announced details of the reinvigorated Right to Buy, which will give up to two million social tenants the opportunity to buy their council home with a discount of up to £75,000 and, for the first time, ensure additional properties sold are replaced with new affordable homes for rent.
Three leading high street lenders and seven of the country's biggest building firms will begin to offer mortgages on newly-built properties to people with just a five per cent deposit; a financial product not available anywhere else in the market. Other leading names, including smaller housebuilders, are expected to.
The deals will mean that instead of a typical buyer requiring a £40,000 deposit for a £200,000 property, they will now only need £10,000. The government and housebuilders will help provide security for the loan, so if the house is then sold for less than the outstanding mortgage total the lender will be able to recover its loss.
The NewBuy Guarantee, claimed Shapps, will support an estimated 50,000 jobs in construction and related industries by increasing demand for newly-built homes while jumpstarting the housing market.
For years, the discounts available under Right to Buy have steadily declined – fewer than 3,700 sales were made last year compared to a peak of 84,000 less than 10 years ago. From April tenants could benefit from a discount of up to £75,000, more than quadrupling the discount cap in London and trebling it in most other parts of the country.
Shapps pledged the new Right to Buy would see no reduction in the number of affordable homes, with any additional homes bought under the scheme leading directly to the provision of new affordable homes for rent.
Home Builders Federation executive chairman Stewart Baseley said: "NewBuy will help thousands of people to meet their aspirations to buy a new home, freeing up the housing market and helping first time buyers and those unable to take the next step on the ladder.
"The scheme will also provide a vital kick-start for the house builders large and small who will be able to build the homes and create the jobs that the country desperately needs. The government deserves credit for backing NewBuy and enabling it to become a reality; it shows that housing is in its rightful place at the top of the political agenda."
Council of Mortgage Lenders director general Paul Smee added: "We are delighted that three lenders are today launching mortgages under NewBuy, and that more are set to follow. These mortgages will help creditworthy borrowers who simply haven't yet managed to build up a large enough deposit to gain access to finance to buy a newly built home. NewBuy is good news for home-buyers, and potentially good news for jobs and the wider economy, too.
“Borrowers need to understand the implications of high loan-to-value borrowing, so we are pleased to support the initiative with clear consumer information to help people decide whether NewBuy borrowing is an attractive option for them."