MI New Home scheme launched in Scotland

A mortgage indemnity scheme has been set up in Scotland which aims to help up to 6,000 households gain easier access to new homes.

MI New Home is similar to the NewBuy scheme launched in England in March and is backed by a Scottish government guarantee.

Participating lenders will offer up to 95 per cent mortgages on homes sold through participating builders up to £250,000.

Supporting lenders at launch are the Royal Bank of Scotland and Nationwide, while Halifax/Bank of Scotland will offer mortgages through the scheme in the near future. Twelve house builders have signed up and more are expected to follow.

£1 billion potential sales

Homes for Scotland, which is leading the scheme, projects that it has the potential to generate sales of up to £1 billion over three years. The scheme could also create or safeguard 22,800 new construction jobs and over 650 apprenticeships.

According to the Council of Mortgage Lenders, there were 44,000 loans advanced for all home purchases in Scotland in 2011 compared to 105,000 in 2006 – a fall of 60 per cent.

Comment

Homes for Scotland chief executive Philip Hogg said: “With housing output at its lowest level since the Second World War, the main obstacle to recovery in our sector remains constraints on mortgage lending, particularly in relation to high deposits.

“The scale of the problem is highlighted by the fact that Scottish home buyers are having to find an average 25 per cent. This equates to nearly £40,000 based on an average Registers of Scotland 2011/12 home price of £156,410 – completely unachievable for most people.”

Government response

Deputy First Minister and Cabinet Secretary for Infrastructure, Investment and Cities, Nicola Sturgeon said: “The Scottish government wants to help people get onto and move up the housing ladder, where it is sensible and sustainable for them.

“High deposit requirements have presented a major stumbling block for those who want to buy a new build home. That is why securing the backing of our leading lenders for this mortgage indemnity scheme is hugely significant.

“I hope this new scheme encourages lenders to offer more high loan-to-value mortgages to credit-worthy borrowers who are currently unable to put down the large deposits demanded in the current mortgage market.

Lenders’ reaction

Andrew Baddeley-Chappell, head of mortgage strategy & policy at Nationwide commented: “Nationwide is pleased to support MI New Home which offers those with lower deposits a step up on to the housing ladder and helps to provide much needed new housing. Our approach helps to ensure the maximum access to home builders and customers.”

Moray McDonald, RBS mortgages director added: “We are delighted to support the Scottish government, and assist more people to get onto the property ladder with a smaller deposit and fee free. Being ready to go from the outset underscores our commitment.”

Scheme development

In June 2011, the Scottish government awarded Homes for Scotland £250,000 to enable it to work with lenders and builders to develop a private sector mortgage indemnity scheme.

The development of MI New Home has been led by Homes for Scotland, working closely with the Scottish Government, Council of Mortgage Lenders and insurance specialist Jardine Lloyd Thompson.