A scheme was instituted by the government to assist potential homebuyers to obtain loans. These loans were granted for up to 95 percent of the property value. The intent is to motivate people to buy houses and energize the construction industry and slow housing market in general.
Barclays and the Royal Bank of Scotland participated in the plan to benefit first-time purchasers and those who already own homes. Up to 100,000 people are expected to be able to purchase a newly constructed house. Instead of the traditional 20 percent banks ordinarily require as a down payment, they were accepting a deposit of only 5.0 percent.
The plan will be put into place in England only. Apartment buildings as well as homes are eligible and can be valued at a maximum of £500,000 (596,137 euros, $781,666). The government is paying 5.5 percent of the purchase price as a down payment and the buyer will be asked to pay 3.5 percent.
The housing minister, Grant Shapps, stated that the plan is to assist everyone to participate in the satisfying experience of becoming a homeowner. In the unfortunate event of a repossession taking place, the lender can recoup losses from the deposit made by the borrower. After that, the lender will recover from the developer’s portion and after that, the state guarantee.
Not everyone is in agreement that this program is a good idea. According to some analysts, the scheme may not help to activate the market as expected. The idea that it will recover at its own pace is expressed by one executive at one financial institution.