Home Builders’ Federation argues scheme has been launched too soon for some members

Representatives of smaller housebuilders have hit out at the launch of the government-backed mortgage indemnity scheme this week.

Smaller builders say that the government, which is putting a £1bn guarantee behind the 100,000-home indemnity scheme, should not have backed it until it could demonstrate it was fair to all sections of the industry.

Large builders say the scheme, which has been broadly welcomed by the industry, could add 10-15% per year to new home sales. Thousands of enquiries have already been notched up.

But because of the way the scheme is formulated, only housebuilders that sell more than 300 homes a year are able to strike their own deals with lenders to offer 95% mortgages.

Others will have to enter into “multi-cell” deals with other housebuilders to generate enough volume, but none have been set up so far.

The Home Builder’s Federation, which led the development of the scheme, said small builders haven’t had the ability to put their own resources intodeveloping the scheme. However, now the scheme is launched it said they were welcome to apply to take part.

Three lenders covering less than a third of the market have so far announced deals with seven builders, covering a similar proportion of new home sales.

Roger Humber, strategic policy adviser to the House Builders’ Association, which represents smaller housebuilders, said: “This should never have been launched without all builders ready.”

Chris Brown, chief executive of developer Igloo, said: “It’s unfair that a government subsidy is being used to help just one part of the market.”

He said he had written to housing minister Grant Shapps on behalf of a consortium of smaller builders asking why they had been excluded.