18
UK-News
Help to Buy
scheme
extension
costs being
unveiled
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.
Guarantees
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.
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.
A number of lenders have expressed
an interest in joining the second
phase. Lloyds Banking Group,RBS
and NatWest 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.
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. 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.
SOURCE bbc.co.uk