The first rates available to home buyers under the latest phase of the Government’s Help to Buy Scheme, have been revealed, with banks confirming that there will be “no reckless lending”.
The controversial Help to buy scheme – which sees 15 per cent of the value of a property guaranteed by taxpayers in exchange for a fee from the lender – helps eager home buyers to obtain mortgages worth up to 95 per cent of the value of the property. However, critics are wary of the scheme as they believe it could lead to further price increases in an already rising housing market.
The first rates – which come from high street lenders RBS and its Natwest subsidiary – will see home buyers offered two-year deals at 4.99 per cent and five-year deals with 5.49 per cent, both with no fee. Each of the lenders anticipate high levels of interest, with around 25,000 first and next-time buyers tipped to sign up over the coming three years.
Halifax, owned by Lloyds Banking Group, is offering a two-year fixed rate deal at 5.19 per cent with a £995 product fee, while HSBC has confirmed that it will be taking part in the scheme from later on this year, making it the first lender to sign up with no taxpayer support.
First-time buyers and existing home owners borrowing to buy properties valued at a maximum of £600,000 will be eligible for the Help to Buy Scheme, which has now been expanded to cover old homes rather than just the new-build properties covered by the first phase of the scheme. Applicants must be planning to live in the home themselves and the scheme is only available for properties based in the UK.
All applicants will also be subject to affordability checks to ensure that they can afford the mortgage repayments. The Council of Mortgage Lenders confirmed that the checks would be as “rigorous” as they were with any borrower.
The scheme is expected to offer £12 billion in mortgage guarantees over the coming three years, with mortgages to be offered from this week and guaranteed by the Government from January next year. It is estimated that the scheme could allow 180,000 mortgages to be taken out across the country.
Prime Minister, David Cameron, told Sky News: “Help to Buy is going to make the dream of home ownership a reality for many who would otherwise have been shut out.”
The first phase of the scheme, which offered 20 per cent loans on new-build properties, is estimated to have helped over 15,000 home buyers to purchase a property in the six months since its launch.