Unattainably high mortgage rates are restricting interest from borrowers and undermining the Government's NewBuy scheme, the House Builders Association has claimed.
Available to buyers of new build properties valued up to £500,000, the scheme offers 95% loan-to-value mortgages with an indemnity mortgage guarantee, funded by the Government and building companies.
The aim of the scheme, launched in March, is to assist first-time buyers onto the housing ladder, but many are finding the aggressively priced 95% LTV deals are out of their reach.
Figures from Moneyfacts.co.uk, however, have shown that the average two-year fixed rate mortgage with a 95% loan-to-value (LTV) rate stands at 5.75%, far too high for the majority of borrowers.
Based on this rate and a £100,000 mortgage, a first-time buyer would face monthly repayments of £629.11. Borrowers with the same mortgage amount on an average two-year deal at 75% LTV would pay a significantly less amount of £557.54.
The House Builders Association has called for mortgage lenders to make high LTV rates more accessible and attractive to first-time buyers and warned that the scheme "is beginning to look as if it could be very embarrassing" for the Government.
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