NewBuy sales hit by mortgage rates

Building new homesA scheme that aims to help people with smaller deposits buy a new-build home has been scuppered by the high rates of lenders, a major builder said.

Redrow has attracted just 63 customers to the Government-backed NewBuy mortgage indemnity scheme since it was launched in March.%VIRTUAL-SkimlinksPromo%
It said the initiative was not enjoying the success it deserves because rates being offered by lenders did not reflect the lower risk profile of the scheme.

Barclays, Halifax, NatWest, Santander and Nationwide are offering mortgages under the scheme, which is aimed at first-time buyers and those who already own a home but only have funds for a 5%-10% deposit.

Developers put 3.5% of the value of every NewBuy home sold into a pot which is used to protect the lender in the event of a default. The Government has guaranteed the scheme in the event that these funds are not large enough to cover a lender's losses.

Redrow said it would like to see the scheme extended to the second-hand market to stimulate demand across the whole housing sector.

Chairman and founder Steve Morgan said the outlook for the industry remained challenging despite his company reporting a 70% jump in profits to £43 million for the year to June 30.

He added: "Supply of mortgages, although slightly improved on last year, remains a significant constraint, as does public confidence due to the country's fragile economic state."

Like most housebuilders, Redrow's margins have improved due to an increasing proportion of its sales being generated from sites purchased since the downturn.

Its average selling price has increased 15% to £189,900 as it benefits from increased sales of its New Heritage Collection, which offers family housing.

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