Help To Buy effect on mortgage lending | The Tenants' Voice
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Help To Buy Mortgage Lending Effect

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help to buy effect on mortgage lending

The platform of Help to Buy schemes set up by the government is starting to see results, in terms of helping renters make that much sought after move out of the rental market, assisting existing home owners to upgrade, and stimulating lending in the mortgage markets. In the three months leading up to the start of 2014 roughly 6,000 people made an offer on a new home and applied for a mortgage as a result of the helping hand being provided by the new schemes.

At the start of January, the government released statistics showing that already some 750 of those who applied for mortgages under the scheme have had them accepted and completed on their purchases. With respect to the applications made for mortgages in the last three months of the year, the potential for accepted mortgage lending amounts to roughly £1 billion generated under the scheme during this time, where previously home buyers would have been left empty handed. Once these mortgages have been approved this enormous sum will provide a considerable boost to lending figures.

There are a number of lenders who already offer Help To Buy mortgage products, including Virgin Money, RBS, Lloyds Banking Group, HSBC and Aldermore, and Barclays and Santander are both due to launch their own products in the early part of 2014. This essentially paves the way for many more renters to start looking for somewhere of their own to buy without the requirement for a substantial deposit with which to do it.

The Help to Buy scheme operates by offering the chance to buy a property that is worth up to £600,000 with a deposit of just 5%. The upper limit on the value of the property means that even those who are based in London can take advantage of it of it (the average house price in London is currently around the £400,000 mark). With economic forecasters the EY Item Club recently predicting that house prices in London are likely to rise to £600,000 by 2018 it is no surprise that many people are keen to get a foot on the ladder now, rather than wait for prices to climb even further out of range. David Cameron recently acknowledged how difficult the housing market currently is for normal people: “many people have found themselves frozen out of the market in recent years as a result of the size of the deposit required…That is why as part of our long-term economic plan we introduced the Help to Buy scheme, so hard-working people with sufficient earnings can get on, fulfil their aspirations and enjoy the security of owning their own home.”

In addition to the Help to Buy mortgage scheme, the Help to Buy package of measures includes the Help to Buy Equity Loan scheme, which offers homebuyers an interest free loan that is designed to be used in the purchase of a new home – with the distinction that the home must be newly built. So far, 20,000 plus householders have taken up the equity loan, which covers 20% of the purchase price of the property, with the buyer requiring a 5% deposit and a mortgage being necessary to cover the remaining 75%. Then there is NewBuy, which offers anyone looking to purchase a home priced at £500,000 or less the chance to do so with a 5% mortgage – NewBuy is specific to newly built homes, which covers both those buildings that are newly constructed, as well as flats that used to be part of a house.

Like the Help to Buy scheme, the equity loan and the NewBuy scheme are not available for anyone who is planning on buying a property on a buy to let basis – these schemes are specifically designed for people to buy homes for themselves and their families to live in.

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