With the end of Help to Buy in sight, what are your options?
It was recently announced by the Government that the current Help to Buy mortgage guarantee scheme will no longer be available from the start of 2017.
This scheme was launched at the beginning of 2014 and was set up to aid prospective buyers with small deposits by providing lenders an incentive to offer 95% mortgages. With this coming to an end in a matter of weeks, we take a look at the deal along with the outlook from experts and the options available going forward.
What is the Help to Buy mortgage guarantee scheme?
The mortgage guarantee scheme was designed to support lenders by offering the option to obtain a guarantee on mortgage loans and help deal with some of the losses if a borrower were to default.
This allows lenders to offer higher loan-to-value (LTV) mortgages of between 80-95%. For example, a home priced at &200,000 would require a 5% deposit of &10,000 from the buyer, &30,000 would be covered by the government on the guarantee and the lender would pay the rest.
The introduction of this scheme caused a huge increase in product numbers at 95% and even resulted in lenders offering more high LTV mortgages outside of the scheme and high LTV product numbers reaching their highest since the financial crisis.
What effect could the end of this deal have on the market?
According to most property and finance experts, it is expected for the number of high LTV products to drop considerably once the government scheme comes to an end.
Press Officer Rachel Springhall from Moneyfacts.co.uk a personal finance data provider, offered her comments on the recent announcement, stating “We have already seen the number residential mortgage deals fall from 270 available in March for borrowers with a 5 per cent deposit to 233 today and this is likely to fall considerably when the Help to Buy deals vacate the market, perhaps even below 150 deals.”
However, there are plenty of signs that indicate that buyers with small deposits will still have options, as David Hollingworth of mortgage broker London & Country Mortgages stated “the market will be ready to stand on its own two feet.” and believes that the increased number of high LTV products available today played a part in the decision to end the government scheme.
Hollingworth went on to say that “The Brexit vote would be the only thing that would call into question whether lender appetite would remain as strong but there has been nothing to suggest that lenders are running scared of lending to those with smaller deposits.”
What are the options for those with small deposits?
Overall the outlook remains positive for first time buyers looking to get on the property ladder. There seemed to be a bit of a resurgence in 95% mortgage deals even before it was announced the deal was coming to an end and many expect rates to remain competitive throughout 2017.
There’s been plenty of movement in the market lately, with many lenders reducing percentage points on their 85% and 90% mortgages. However, if you’re still in search of a 95% mortgage, Halifax, Post Office Money and Virgin Money are currently offering the best deals, with Halifax top of the pile with a 2 year fixed rate mortgage at 3.64%.
There have also been plenty of news deals hitting the market from the smaller building societies such as Mansfield Building Society, Hanley Economic Building Society and Furness Building Society, showing a wide range of deals to aid those concerned about the end of the government scheme.
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