NewBuy Mortgage Rates

katoria88

Hello all,

I have just registered after reading some comments on the forums ref the NewBuy scheme, which has led to some concerns!

My partner and I have reserved a new build property with Persimmon homes with the intention of taking out a NewBuy mortgage with Natwest. The two do work together on the NewBuy scheme so that's not a problem.

We will be paying the maximum 10% and have received a quote from Natwest offering a 2 year fixed rate of 4.49%.

We intend to stay in the property for a number of years, as we are well aware of the initial drop in value.

So my question is why is there so much negativity over the NewBuy scheme? The 4.49% seems like a very competitive rate and if it allows us to get on to the property market and still own 100% of the property (i.e. not need to go down the shared equity route), surely this is a good thing? We have our hearts set on a new build.

Any advice gratefully received, thank you.

bpe

Hi. My wife and I have also been looking in to this.

To give you an idea we bought a new build 5 years ago at 176,000 - today its worth around 155,000, 21k loss. So our equity 5 years on is marginal. Our LTV if we remortgaged today would be 94% (although we have made overpayments to reduce this as rates dropped). So if the pressure was on to remortgage today to a fixed rate, we would find it very difficult.

We looked at moving to a bigger house this month, new build again, and keeping our existing 2.5% Nationwide BMR rate (pure luck), and "topping up" with the Newbuy element as the NationWide max LTV is 85% on new build, through Newbuy its up to 95%.

The concern for us is history repeating itself when we come to remortgage rather than moving. The new house price will take a tumble and its likely rates will only go up in the future. Look at the way some of the lenders have acted recently with the SVRs increasing once your deal ends, you could have no choice but to stay on their SVR rate as your LTV could still be high in 2 years time with less options from lenders at a reasonable fixed rate, as well as the new build premium dropping the minute you move in, all increasing the LTV for next time.

martinsurrey

your getting a 4.49% 90% mortgage which is good, but if you have a good credit history you can get this without going down the Newbuy route.

If you DONT go down the Newbuy route you could negotiate 10-15% off the sales price of the house.

Are you paying the release price (so the price in the brochure?)? if so your overpaying!

BobMuk

Hi Martin
Is 10-15% about right across the board for most big builders?

I'm looking at buying a Bovis house that's up for £250K (with a "normal" mortgage) and did some sums based on what I reckoned the Newbuy scheme actually costs the builder... I thought 10% sounded reasonable, but if I can get 15% I'd be even happier

martinsurrey

its all very much site and stage dependant, I would say across all plots and all developments 10% off release price is about right,

Don’t expect anything off the first prime waterfront properties in a development, but the last few houses at the end of a large site, 2 months before the developers year end, 15-18% is possible.

these reductions are only possible if you bargin hard and purchase on a traditional deposit+mortgage, not a fancy scheme.

brit1234

katoria88 wrote: »

So my question is why is there so much negativity over the NewBuy scheme?

The scheme is designed to benefit the builders and not the buyer. It allows the builder to keep prices inflated and puts most of the risk on the buyer and tax payer. Apart from Natwest most Newbuy mortgage rates average 6% and I would not like the chances of remortgaging in a few years when left in instant negative equity.

I would touch Newbuy, shared equity/ownership with a barge pole.

katoria88

Hi,

Thank you for your replies.

We are still getting 10% off the asking price (maybe because it is at the end of the development and also because of our jobs).

Unfortunately because the mortgage companies require (from what I have seen) a minimum of 20% deposit, for reasons which I completely understand, we can not afford this value on top of legal fee's, cost of moving etc. So NewBuy is our only option...

Another option would be a 5 year fixed at 4.99%.

katoria88

BobMuk - why would the NewBuy scheme cost the builder anything? They are still getting the full price of the house and are just putting their money away in case the mortgage provider need to repossess. This is my understanding anyway and I may be completely wrong!

Brit1234 - I appreciate your views but for us it is the best option!

BobMuk

katoria88 wrote: »

BobMuk - why would the NewBuy scheme cost the builder anything? They are still getting the full price of the house and are just putting their money away in case the mortgage provider need to repossess. This is my understanding anyway and I may be completely wrong!

Yup, they're putting aside money with the mortgage lender. That money is earning them nothing for the duration and would be better used for, say, investing in another development of houses - which they'd then make a profit on. That's where it costs them, and that's why if you mention you don't need Newbuy when you visit a developer they immediately say they'll negotiate on price (that's what happened when I spoke to Bovis).