Lenders unveil mortgage offers under help to buy
Britain’s state-backed banks are braced for a flood of interest in the help to buy scheme. But MPs warn the Bank of England should have more powers to intervene.
Taxpayer-backed Royal Bank of Scotland and its subsidiary NatWest immediately set out fixed-rate mortgage deals under the scheme. Halifax and Bank of Scotland, owned by the state-backed Lloyds Banking Group, will start offering loans under the scheme on Friday.
Virgin Money is the latest lender to sign up, but the Lloyds brand itself is not taking part and several other major mortgage providers are waiting for further details before deciding whether or not to get involved.
The new phase of the government’s £12bn scheme, launched on Tuesday, will see up to 15 per cent of a property’s value guaranteed by taxpayers – in return for a fee from the lender.
RBS and NatWest are offering a two-year, fixed-rate mortgage starting at 4.99 per cent for those offering a 5 per cent deposit, with no fee. Halifax will start offer a rate of 5.19 per cent with a £995 fee, for those with a 5 per cent deposit.
The government said fees for lenders participating in its flagship mortgage guarantee scheme would range from 0.28 per cent to 0.9 per cent of loan value, depending on the size of the deposit.
Help to buy is aimed at helping those who would otherwise struggle with a deposit, to get a mortgage worth up to 95 per cent of a property value. The estate agent, Haart, estimated that the scheme would see the average first-time buyer deposit fall from £33,948 to £7,218.
An earlier phase of the scheme, offering 20 per cent loans on new-build properties, has already helped more than 15,000 people buy a new home since it was launched six months ago.
Scheme ‘will raise house prices’
But help to buy is controversial because critics fear it could fuel further rise in a housing market where prices are already rising.
And a cross-party group of MPs on the Treasury select committee said that the Bank of England should have power to veto the scheme’s extension when it is due to be renewed in three years’ time. The scheme should also be kept under constant review, the MPs said.
House prices are static and the reality is Help to Buy will not dramatically increase the number of buyers coming through our doors – Estate agent, Stockport
The committee also said that the programme is likely to “raise house prices, rather than stimulate new supply,” as the chancellor hopes.
But the Treasury says that while house price inflation stands at 3.3 per cent, it is only 0.8 per cent when the property hotspots of London and the south east are removed.
‘Unhelpful’ hype
Many lenders said they were anticipating a lot of interest in the scheme this week, and some are extending their mortgage services to deal with demand.
But Colin Mellor, of Edward Mellor Estate agents in Stockport, said there was a danger that the hype could drive some buyers away.
“The hype is unhelpful. Buyers could easily be put off by fears the housing market is entering another bubble.
“In the north, there is no bubble and there will not be a bubble. House prices are static and the reality is Help to Buy will not dramatically increase the number of buyers coming through our doors,” he told Channel 4 News.
“There will not be more money available for lending, so we don’t expect a huge increase in transactions. And first time buyers still have the same problems they had before in terms of mortgage eligibility. Many applicants will have too much existing debt to qualify, while incomes are not rising and unemployment is still high.”