The Deposit Unlock scheme is an insurance-backed loan which allows customers with only a 5% deposit to purchase new build properties.
It has been designed as an alternative to Help to Buy, which is due to end in 2023, and the Mortgage Guarantee Scheme, which doesn’t include new builds.
The building society revealed today the scheme would initially be available on selected plots in the North East of England through four participating house builders – Barratt Developments, Bellway, Keepmoat and Vistry, the building society announced today.
However, industry experts think similar initiatives could be rolled out across other parts of the country in the near future.
Paul Broadhead, head of mortgage & housing policy at the BSA said: “Deposit Unlock is a great example of a private sector initiative which addresses an important social challenge – helping people to buy their own home.
“This support for higher loan to value lending on new homes will be particularly helpful for younger buyers who often struggle to save for a deposit while paying rent at the same time.
“Our research shows that raising a deposit is now the single biggest barrier to would-be buyers. Building societies are synonymous with home ownership and it is good to see Newcastle Building Society leading the way as the first lender to sign up.
“I am confident that more will follow.”
Rates and fees
The deals, which are the first to be made available under the insurance-backed mortgage scheme, will start at 3.50% for a two-year fixed rate.
It also includes a five-year fixed rate at 3.75%. Both products are fee-free and come with a free valuation to further support low-deposit borrowers.
The scheme aims to help borrowers secure a new-build home up to a value of £330,000 with a deposit of just 5%.
Stuart Miller, chief customer officer at Newcastle Building Society, said: “More than ever, we need to help provide more options for low-deposit borrowers looking to buy a new-build home. Deposit Unlock is a truly innovative initiative and we’re pleased to be the first lender to offer products under the scheme.”
The launch of Deposit Unlock mortgages follows the announcement earlier this month that Newcastle Building Society was one of the first lenders to support the government’s First Homes scheme.
Miller added: “Both Deposit Unlock and First Homes are examples of forward-thinking collaboration, bringing new products to the market to help people achieve the dream of owning their own home.”
‘A positive step forward’
The organisation representing mortgage lenders – the Intermediary Mortgage Lenders Association (IMLA) – has also given the scheme its approval.
Kate Davies, its executive director described the unveiling of the scheme as ‘a positive step forward in the provision of low-deposit lending’ which would open another door for those wanting to buy properties that have traditionally been more difficult to finance – such as new-build homes and flats.
“The government’s announcement that its Help to Buy Equity Loan scheme would be withdrawn in 2023 signalled a clear need for viable alternatives like these, to help more people step onto the property ladder, as well as progressing up it,” she said.
“There are, of course, other providers developing innovative schemes aimed at providing an alternative to Help to Buy.
“IMLA is pleased to have been able to facilitate discussions between providers and members and we are delighted that one of our members – Newcastle Building Society – is the first to launch with Deposit Unlock. We wish it every success.”
