Deposit Unlock mortgages launches nationally

Deposit Unlock, a mortgage scheme that allows new build buyers to purchase with a 5% deposit, has launched nationally with 17 major builders after a successful regional pilot.

Nationwide is the latest major lender signed up to Deposit Unlock and will offer the product on newbuild properties for both first-time buyers and second steppers up to £750,000.

Newcastle Building Society, which was the first lender to offer Deposit Unlock nationally following a successful trial in the northeast, has recently seen the first completions under the scheme.

More lenders are expected to join in the new year.

With house prices rising, Deposit Unlock aims to open up the newbuild market to more borrowers who do not have access to large deposits or the Bank of Mum and Dad, and help soften the blow of the withdrawal of the Help to Buy Equity Loan scheme, that has been so important for home buyers and housing supply over recent years.

Help to Buy has already assisted more than a third of a million households to purchase a new build home since its launch in 2013 and has been a major contributor to a doubling of housing supply over the past eight years and 70,000 equity loans have been fully paid back by homeowners, generating a 10% return for the Exchequer – some £315 million.

The mortgage indemnity scheme has been developed by the Home Builders Federation and 17 of its largest members, alongside Homes for Scotland and Deposit Unlock’s scheme manager Gallagher Re. It will be available on developments across England, Scotland and Wales and is open to all HBF and HfS members. More builders will be added in the coming weeks.

Upon completion of home purchases offered as part of the scheme the developer funds a mortgage indemnity and deposits cash to cover any potential losses. The scheme greatly reduces risk for the lender, protecting them from a proportion of the potential loss in the event of any default.

The pilot in the northeast that was launched in June and saw Newcastle Building Society offering mortgages through the scheme on the sites of four participating builders. The first successful completions through the scheme were announced last week.

The building society then rolled out the scheme nationally in September with a limited number of builders, in advance of the Nationwide announcing in October its intention to join Deposit Unlock.

Stewart Baseley, executive chairman of HBF, comments: “Ensuring people can buy a new build home is key to the industry’s ability to deliver the Government’s housing ambitions. Too many people are unable to realise their ambition of homeownership because they simply can’t afford the deposit required.”

“The industry has worked hard to develop a sustainable solution that will help more prospective buyers onto the housing ladder, maintain demand and so enable builders to deliver more desperately needed homes.”

He adds: “Help to Buy has played a significant role in supporting increases in housing supply in recent years and has turned homeownership dreams into reality for hundreds of thousands of households. However, with the new Help to Buy scheme now less accessible in some regional markets including many parts of northern England, and with the programme closing in 2023 a new option was required.”