Shapps declared the NewBuy Guarantee open for business and said it is a scheme that will enable an estimated 100,000 prospective and existing homeowners to buy their dream home with much smaller deposits than currently required.
The increased demand for new homes will also give a boost to house builders and the economy, and see thousands of workers returning to building sites across the country.
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 that additional properties sold are replaced with new affordable homes for rent.
From today 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 5% deposit, a financial product not available anywhere else in the market.
Other leading names, including smaller house builders, are expected to follow their lead in the coming weeks and months.
Today's deals will mean that instead of a typical buyer requiring a £40,000 deposit for £200,000 property, they will now only need £10,000. The government and house builders 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 scheme, which has attracted strong support from many of the country's biggest house builders and mortgage lenders, will offer help for up to 100,000 buyers who would otherwise be frozen out of the market.
Barclays who will offer 95% Loan to Value (LTV) mortgages on properties built by Barratt, Bellway, Bovis, Persimmon, Redrow and Taylor Wimpey at just 4.99% fixed rate for two years and 5.89% fixed rate for four years.
Nationwide will offer 95% LTV mortgages on properties built by Barratt, Bovis, Bellway, Persimmon, Redrow and Taylor Wimpey 5.69% fixed rate for three years and 5.99% fixed rate for five years.
NatWest who will offer 95% LTV mortgages on properties built by Barratt, Bellway, Bovis, Linden Homes, Persimmon, Redrow and Taylor Wimpey at 4.29% fixed rate for two years and 4.99% fixed rate for five years. In addition, Crest Nicholson will be joining the scheme imminently.
The NewBuy Guarantee will support an estimated 50,000 jobs in construction and related industries by increasing demand for newly built homes and will also help jump start the stalled housing market as people begin to move, ensuring more newly built and older properties become available to buy, according to Shapps.
He also published final details of a revamped Right to Buy, which will significantly increase the discounts for two million social tenants in England. For years, the discounts available under Right to Buy have steadily declined, putting the dream of buying a home out of reach for many tenants. Fewer than 3,700 sales were made last year compared to a peak of 84,000 less than 10 years ago.
Ministers have made a key commitment that everyone should have the chance to own their own home, so 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 said that 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.
Councils will be able to sign an agreement with the Government for using the receipts from sales to build new affordable homes in their area. The receipts will only need to meet 30% of the costs, mirroring the highly successful funding model used for the Affordable Homes programme.
Where receipts are not used locally they will be passed to the Greater London Authority and the Homes and Communities Agency, who will re-invest the money in new affordable housing across the country.
‘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,’ said Cameron.
‘We are acting today across the board to make this happen. We're re-booting 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,’ he said at the launch.
‘It's no good hoping people will climb the property ladder if the bottom rung is missing. Affordable properties and available mortgages are vital. So we're working with leading house builders and lenders to get the scheme underway,’ he explained.
‘It's a vital boost to the housing market, giving people good affordable new homes and backing thousands of jobs in construction in the process. This government doesn't just talk about expanding home ownership: we're making it happen,’ he added.
Shapps said that the government had inherited a housing market in disarray. ‘Millions of hard working people were blocked from taking their first step on the housing ladder, their desire to buy a home no longer a dream, but a distant fantasy,’ he said.
‘We want to help everyone achieve their aspirations, and feel the pride of home ownership. So I'm delighted that from today the NewBuy Guarantee will give thousands of prospective buyers the chance to buy a home with a fraction of the deposit normally required. We're also scrapping the miserly restrictions on the level of discounts under Right to Buy and that is great news for thousands of tenants who have done well for themselves and want to buy the home they live in,’ he pointed out.
‘But we are determined to maintain the number of affordable homes for rent. So for the first time, homes that are sold will be replaced by a new affordable homes, helping councils meet housing need and getting the nation building again,’ he added.
According to Home Builders Federation executive chairman Stewart Baseley 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,’ he added.
Council of Mortgage Lenders director general Paul Smee said the news that three lenders are today launching mortgages under NewBuy, and that more are set to follow is welcomed by the industry.
‘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,’ said Smee.
‘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,’ he added.
