Aldermore joins the NewBuy mortgage scheme

Aldermore has become the sixth lender to join the Government’s NewBuy scheme, launching two deals aimed at homebuyers with small deposits.

Aldermore is the latest lender to enter the NewBuy mortgage market. The bank joins Barclays, Nationwide, NatWest, Santander and Halifax in offering mortgages up to a maximum loan-to-value of 95%, giving borrowers a chance to get onto the property ladder with just a small deposit.

The NewBuy scheme is an agreement by homebuilders and the Government to guarantee lending on a high loan-to-value mortgage, providing it is on a new-build house or flat. Both parties put aside money in an indemnity fund, which can be used should the lender be faced with any losses. This guarantee makes lenders happier to advance a higher percentage of the property’s value than they otherwise would.

The scheme is designed to help both first-time buyers unable to gather a large deposit and other purchasers with limited equity in their existing home move up the property ladder.

When the NewBuy scheme was unveiled in March this year, there were only three lenders prepared to offer mortgages. Since then interest has picked up and more have come on board, though as we highlighted in Why the NewBuy scheme isn't working, the mortgages on offer were not always the best.

Aldermore has boldly labelled itself as the ‘first challenger bank’ to support the scheme. So let’s see how the deals stack up.

Aldermore’s NewBuy offering

Aldermore has brought two new deals to the table.

You can fix your rate at 5.48% for either two or three years, with a fee of £999 on both products. The deals are available on homes up to the value of £500,000.

Gifted deposits (money given to you by parents or close relatives) will be accepted for first-time buyers as long as evidence of rental history over 12 months can be shown.

Aldermore will be making its deals available through Fairview New Homes Limited.

How it compares

Aldermore's deals feature towards the middle rather than the top of the best buys in terms of rates.

NatWest currently holds the cheapest two-year fixed rate deal with a price of 4.49%, fee free. Aldermore’s offering is nearly 1% more expensive and comes with a fee of £999.

At launch Aldermore did have the cheapest three-year deal, but Santander has since dropped its rates. Santander's three-year deal was priced at 5.49% with a £99 fee (Aldermore had the edge by just 0.01%) but the rate has been slashed to 4.99% with the same fee.

However, when it comes to NewBuy, the deals available for you to choose from will depend on which homebuilders the lenders have chosen to work alongside. 

So even though Aldermore offers some competitive rates compared to some other lenders, it is limited to just one homebuilder, Fairview New Homes, which builds properties in the south and east of England. Not great if you live in the north or don't like the properties the builder has to offer.

Aldermore says it hopes to roll out the scheme with more building partners over the coming months. But until then you may have to go for another lender that works with more developers to find the right property and mortgage for you.

For a list of homebuilders involved in the scheme see here.

NewBuy mortgages (95% LTV)

Here is the most up-to-date round-up of NewBuy products available as of 5th September 2012. Remember to check which homebuilders are linked to each mortgage to find out what sort of deal you could get in the area you want to buy a home.

Is NewBuy a success?

The last time I reported on how the NewBuy scheme was doing was back in May, there was a limited choice of deals and some tension between homebuilders and mortgage lenders over rate hikes. Plus at the time only one NewBuy deal had been completed.

Today things look a bit better for the scheme.

One of the biggest developers involved with the project, Taylor Wimpey, told lovemoney.com that it has broken through the 200 sales mark, weeks after reaching 100 sales. The developer’s achievement represents one third of the total sales in the scheme.

Likewise the lenders involved are reporting a healthy uptake and are starting to get more competitive. NatWest has seen 300 applications go through while Santander and Barclays have dropped rates across its range and Nationwide has made the same move but added two new low fee alternatives for buyers.

Steve Turner, Head of Communication at the Home Builders Federation told us: "NewBuy is really starting to ramp up now and over the next few years will help tens of thousands realise their ambition of home ownership.  

"At launch we had seven builders and three lenders and we now have over 30 builders and six lenders offering NewBuy. It is proving a real boost for people who want to buy but haven’t got a huge deposit.”

Clearly NewBuy is picking up momentum and the numbers are slowly starting to add up. But the project is a long way off the 100,000 people it was created to help. However, with more lenders coming on board giving more choice to homebuyers this scheme may have some legs.

At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.

Use lovemoney.com's innovative new mortgage tool now to find the best mortgage for you online

At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.

This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article.

Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.

Your home or property may be repossessed if you do not keep up repayments on your mortgage

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