23 Oct Help To Buy
The Help to Buy (HTB) scheme has been launched with the aim of helping thousands of people buy their own home. It was announced in April 2013 with the first phase for new build properties. The second phase is for the second hand market and was due to start in January 2014 but the government has announced that people will be able to start applying for the new mortgage guarantee from week commencing 7th October.
HTB is aimed at people who cannot get on the property ladder, move to a new home or remortgage because they cannot afford the large deposit required, often up to 20 per cent.
Under the new phase the borrower will only need a 5 per cent deposit with the government guaranteeing up to the next 15 per cent of the property’s value, in return for a fee paid by the lender. The guarantee is for the lender’s benefit not the buyer’s.
Only repayment mortgages on homes up to a maximum value of £600,000 will be offered under the scheme and there will be tough checks to make sure borrowers can afford their mortgage payments. The scheme will not include interest-only or self-certified mortgages, properties being purchased as second homes or buy to lets, properties being purchased on shared ownership or on shared equity schemes. The new mortgages will not be available to people with a history of difficulties making debt repayments.
Several lenders will be offering the new Help to Buy mortgages to customers and these at present include Lloyds Banking Group, the Royal Bank of Scotland and Aldermore. Other high street lenders including HSBC and Virgin Money are expected to join the scheme soon.
The Help to Buy mortgage guarantee scheme will be available for three years up to January 2017. Every September the government and the Bank of England Financial Policy Committee will review the impact of the scheme and examine whether the fees or the price cap should be adjusted. If any future government proposed to extend the scheme beyond its three year life the FPC would need to agree.
The general view is that confidence is returning to the property market with a higher percentage of homeowners, surveyors and lenders expecting property values to rise during 2013 and 2014.