Help to Buy mania is go

Houses with colourful doors
Will buying one of these be a more realistic prospect now?
"You still need to shop around, examine the market, get some expert advice and make sure that this is the right mortgage for you" Steve Williams, Gocompare.com
  • | by Kristian Dando

Would-be homeowners could stand a better chance of getting on the property ladder, as lenders begin to reveal a range of mortgages which will be available under the new, extended Help to Buy scheme.

Partially state-owned banks RBS, Halifax and Lloyds will start taking applications for new Help to Buy mortgages next week.

Potential buyers, who would have previously needed deposits of up to 20% to buy a home, could now be able to get their hands on a 4.99% no-fee mortgage with RBS or NatWest with just a 5% deposit, subject to financial checks.

Meanwhile, HSBC and Virgin Money will be offering Help to Buy mortgages later this year.

Steve Williams, mortgage expert at Gocompare.com, said: “A 95% loan to value mortgage is very rare in the current market, but the rates on offer are still relatively high when you consider that there are other deals out there at the moment offering interest rates as low as 1.99% to 2.5% for a two-year fixed mortgage. However, to get that rate you would need a 65% deposit.

“Even if you haven’t got a large deposit you still need to shop around, examine the market, get some expert advice and make sure that this is the right mortgage for you. But, if you have already saved as much as you can for your deposit, and a 95% mortgage won’t stretch your monthly outgoings, then Help to Buy is definitely worth considering, but go in with your eyes open.”

Recent research from Santander suggested that as many as 5.1 million people in the UK and Northern Ireland are likely to buy a home over the next 12 months, of whom a third might be taking advantage of the Help to Buy scheme.

What is Help to Buy?

Help to Buy is a government initiative to get people buying homes. The government believes it will stimulate both the housing market and the wider economy.

The first part of the Help to Buy scheme kicked off in England in April.

Buyers of new-build homes were eligible for a 20% equity loan from the government, as well their own 5% deposit.

Phase two of the scheme will see the government offering a 15% guarantee to the lender. It’s available to both first-time buyers and home movers who need to borrow. It will be available for both new and old homes up to a limit of £600,000.

Help to Buy has already had an impact – it has been partially credited with helping house sales reach their highest level since 2008. However, Help to Buy’s many critics believe that it will create an over-inflated market and an unsustainable housing bubble – much like the conditions contributing to the financial crash. The Treasury Select Committee, for instance, argues that the scheme could raise house prices, rather than stimulate the number of homes for sale.