Help to Buy scheme extension costs being unveiled

Houses Homebuyers in England may be able to find a mortgage, even if they do not have huge savings

Banks have begun to unveil mortgages which they will offer under the expanded Help to Buy scheme.

The government's initiative is designed to enable buyers who can afford only small deposits to buy a home.

RBS, NatWest and Halifax will start taking applications this week, with HSBC and Virgin Money joining later.

There have been concerns the scheme could fuel a housing price bubble, but Treasury Secretary Danny Alexander told the BBC that there is no UK price boom.

"People who think that there's a housing bubble should get out more. They should get out of Kensington and Chelsea, and go to Manchester or Birmingham, and major towns across the country," he said.

He said the scheme would help those people who did not have "piles of cash" for a mortgage deposit.

RBS and NatWest are offering a two-year, fixed-rate mortgage starting at 4.99% for those with a 5% deposit, with no fee.

Halifax will be taking applications in a few days at a rate of 5.19% with a £995 fee for those with the same deposit.

HSBC said it would join the scheme later in the year, with Virgin Money and Aldermore saying they would offer Help to Buy mortgages from January.


The scheme is getting under way as surveyors report their sales levels are at their highest for nearly four years.

The Royal Institution of Chartered Surveyors (Rics) said a large majority of surveyors were expecting house prices to rise.

Start Quote

Mistakes could distort the housing market or carry threats to financial stability”

End Quote Treasury Select Committee

The first phase of the Help to Buy scheme in England started in April, when buyers of newly built homes were eligible for a 20% equity loan from the government on top of their 5% deposit.

Similar schemes are operating in Scotland and Wales.

Under the second phase, buyers across the UK only need to provide a small deposit, with the government offering a guarantee of 15% of the loan to the lender - for a fee - to encourage the bank or building society to offer the loan.

That fee charged to the lender is expected to be up to 0.9% of the original loan level. This is a one-off fee dealt with entirely by the lender, which guarantees 15% of the mortgage for seven years.

Those who apply will face checks to make sure that they can afford the mortgage payments. The Council of Mortgage Lenders (CML), which represents lenders, said affordability checks would be as "rigorous" as they were with any borrower.

The scheme will be available for first-time buyers and home movers borrowing to buy new and old homes valued at no more than £600,000. It is expected to continue for three years.

It means a buyer looking to purchase a home costing £200,000 would have to put down a deposit of around £10,000. Demands have been much higher than this for many first-time buyers since the start of the financial crisis, usually about 20% of the value of a home.

Best buys?

Prime Minister David Cameron announced at the Conservative Party conference that the second phase of the scheme would be brought forward by three months from January.

Dickie and Heidi Steel say they can save up more quickly for a 5% deposit

A number of lenders have expressed an interest in joining the second phase. Lloyds Banking Group and RBS are the most prominent. Other lenders have yet to commit.

Some products from the Halifax and Bank of Scotland will be available from Friday, with deals from other lenders expected to be in place by January.

Comparisons on the interest rates are difficult, as there are so few 95% mortgages on the market at present.

The most competitive, widely available two-year fixed rate mortgage before Help to Buy, for those offering a 5% deposit has an interest rate of 5.95%, according to financial information service Moneyfacts.

For those able to offer a 10% deposit, the cheapest mortgage deal was 3.54%, with a fee of £1,675, Moneyfacts said.

Price rises

An influential group of MPs has echoed concerns about the potential effect of the Help to Buy scheme. The Treasury Select Committee said that great care was needed from the government when setting up and running the scheme.

"Mistakes could distort the housing market or carry threats to financial stability," it said.

Housebuilding The first phase of Help to Buy was aimed at stimulating housebuilding

It said that - without care - the scheme could raise house prices, rather than stimulate the number of homes for sale.

"We continue to believe that the government of the day will face strong incentives to extend the scheme, with the attendant risk that the mortgage guarantee scheme becomes a permanent feature of the UK mortgage market," it said.

Last month, Chancellor George Osborne asked the Bank of England's Financial Policy Committee (FPC) to make annual reviews of the scheme, starting next September. The committee had been due to make an assessment only after its first three years of operation.

Treasury officials said that the FPC would advise on the fee that lenders have to pay, which could be changed each year, and whether to change the £600,000 limit.

Mr Osborne said that the housing market was recovering from low levels of activity and the latest extension of Help to Buy would help many more people get a foot on the ladder.

Mr Alexander said the Treasury Committee was right to say that Ministers should keep a close watch on Help to Buy. "We will make adjustments if they (the FPC) recommend them," he said.

Shadow Treasury Minister Chris Leslie describes Help to Buy as a "lopsided approach"

He also rejected criticism that the government should be tackling a house supply shortage, rather than demand. "All the housebuilders tell us is that what is holding them back (building more houses) is a lack of demand," he said. "There are lots of other policies that this government is doing to tackle demand."

Chris Leslie, shadow chief secretary to the Treasury, questioned whether homes as expensive as £600,000 should be included in the scheme, and said that more affordable homes should be built.

"Unless George Osborne acts now to build more affordable homes, as we have urged, then soaring prices risk making it even harder for first-time buyers to get on the housing ladder. You can't tackle the cost of living crisis without building more homes," he said.


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  • rate this

    Comment number 197.

    Help To Buy does what it says on the tin. Helps those that are creditworthy to buy a home without a hefty deposit. Lenders are as strict as ever when it comes to credit checks.
    Building activity generates 5 jobs for every house built , that is why it is so important to a healthy economy.
    New developments also generate affordable housing and many other social benefits.

  • rate this

    Comment number 196.

    Yet another "con" by the CONservatives,just wait a few years till interest rates rise to their real level and watch those who use this scheme cry and whinge as they sit there with negative equity once again.The country will never get back on it's feet just by selling houses to each other,better put money into new manufacturing and exports.

  • rate this

    Comment number 195.

    Why does someone getting onto the house-owning ladder need to spend £600,000 on a property, unless they are the son/daughter of rich parents and want a flat in Mayfair or Belgravia? I suspect that this is a ploy to help the 'wrong' people.

  • rate this

    Comment number 194.

    @188. Sean
    We need a single-issue party for the next election who will make home ownership other than as main residence of the owner untenable or at worst excruciatingly expensive.
    With the lack of jobs out there most people are doing buy to let to survive and others to shore up their pensions. Those who can not afford are using these let houses to rent a space / room. You'd cause massive damage

  • rate this

    Comment number 193.

    There needs to be strict limits on the amount of money people can borrow. I see no mention in the article or how many times their salary people are allowed to borrow. I don’t have any issues with people getting 95% mortgages as long as they can realistically afford the repayments. I bought my first flat in 2000 with a 3% deposit. This was 2.5 times our joint income and was very manageable.

  • rate this

    Comment number 192.

    'I would seriously advise against anyone mortgaging themselves to the limit, as when interest rates rise, as they surely will, it will be a bloodbath'

    Why will it? The majority of people would of factored in a rise, if any! RBS are charging 5% for one of these, which is very high anyway!

    Stop scaremongering.

  • rate this

    Comment number 191.

    184. DemoDave
    Only problem is that as soon as the relaxation of the planning laws swings into action and houses start being built on any scale on devalued building land (because of there will then be so much of it) house prices will reverse

    I doubt that house prices will ever reverse unless people are desperate the population is rising asides from which why build if you can't sell ?

  • rate this

    Comment number 190.

    There is really no end to this government giving their rich toff mates as much money as they can. This is usually disguised or camouflaged as helping everyone.

    This scheme is going to push house prices up. Only the wealthy and their offspring can afford houses around £600k.

  • rate this

    Comment number 189.

    Developers are buzzing around Croydon promising to build tower blocks, most of which property is being marketed abroad. Just face facts, they, our Councils and our govt all expect us to rent in future, the property industry is not for the likes of us. Home ownership was a temporary thing, aided by two wars, before 1920 very few owned their homes and that's how the Tories liked it.

  • rate this

    Comment number 188.

    We need a single-issue party for the next election who will make home ownership other than as main residence of the owner untenable or at worst excruciatingly expensive. Nothing of long-term value will change in this country while house price betting is the best paying game in town.

  • rate this

    Comment number 187.

    I hate to be such a cynic but I get the distinct impression that any benefit to first time buyers who can't afford the deposit will be wiped out by the new year as this scheme drives up house prices further.

    However, this will give the Government positive economic figures to boast about and rising house prices will certainly please existing homeowners, who happen to be the Tories core voters.

  • Comment number 186.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 185.

    @171. Goves Silly Temper Tantrum
    'Just build more houses, Gideon. Don't inflate another housing bubble.'

    Eh ? and you think builders will give them away to you ? They are not building cause they can't sell (to make a heavy profit). They were the ones who did the inflating in the first place!

  • rate this

    Comment number 184.

    Another housing bubble? and who will pay the costs? Why of course the taxman (that's you and me) and the poor souls who borrow the money to get 'on the housing ladder' Only problem is that as soon as the relaxation of the planning laws swings into action and houses start being built on any scale on devalued building land (because of there will then be so much of it) house prices will reverse....

  • rate this

    Comment number 183.

    Of course this will re-inflate the housing bubble, it an import of fanny mae in the states, look whats happened there! give people mortgages they cant afford then down the line repossess the house. Its wealth confiscation at its worst, funded by the same money taken away from the welfare budget, this government is all about the rich. I cant wait until the bubble bursts, then all else will follow.

  • rate this

    Comment number 182.

    175. internet opinion analyst
    Does anyone know how I can invest my money in such a way that I profit from a 2nd housing crash?

    Buy to Let, you can't lose, ensuring your tenants will never raise the deposit to buy the house next door. When prices fall, you can buy out the people who used this latest scam, sorry scheme, to pay over the odds, who will be facing negative equity, your new tenants!

  • rate this

    Comment number 181.

    UK is digging its grave deeper and deeper...

  • rate this

    Comment number 180.

    One thing's for certain, our children and young people face a lifetime of penury servicing these mortgages.

  • rate this

    Comment number 179.

    Isn't this sub-prime lite - and a free, indirect bonus for estate agents - all at tax payers' expense? People aren't only being priced out of mortgages, but good quality rental too. Luxury flats in London are being bought by speculators, which they keep empty; it's an asset. We need a Marshall Plan for housing: homes for people to LIVE in. Tories will call such an idea "social engineering"..

  • rate this

    Comment number 178.

    That's the bloody Tories for you. Selling our Royal Mail cheap to the crooks in the city of London is another


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