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Help to Buy scheme extension launched


The second stage of the ‘Help to Buy’ scheme has been launched three months early in the hope that the housing market will further benefit from growth in a similar way it did under the initial stage of the scheme.

The scheme was originally launched with the intention of helping home buyers find a mortgage, even if they did not have a vast amount of savings. This has been achieved by the government guaranteeing a 15% mortgage fee to banks on the basis of each mortgage applicant putting forward 5% themselves.

However, until recently, the scheme was only active for the purchase of newly built homes, therefore fulfilling its purpose of encouraging the build of new homes. The scheme has now been extended to be active on all homes up to the value of £600,000 and is expected to continue for three years, and as a result, mortgage providers are beginning to unveil the costs of their mortgages which they will offer under the extended Help to Buy scheme.

RBS, Natwest and Halifax will start taking mortgage applications under the ‘Help to Buy’ scheme this week, whilst HSBC and Virgin Money will join later on. RBS and NatWest are offering a two-year, fixed-rate mortgage starting at 4.99% for those with a 5% deposit, with no fee. Furthermore, 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.

There are still some concerns that the scheme could cause a repeat of the housing bubble, however Danny Alexander, Treasury Secretary, argued against this, saying: "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 further went on to say that the scheme would help people who do not have ‘piles of cash.’

Rising Prices

The scheme has been extended as surveyors are reporting their sales levels are at their highest for nearly four years. The Royal institution of Chartered Surveyors (Rics) has claimed that a large majority of surveyors are expecting these house prices to continue to rise further.

Under the second phase of the scheme, the government will offer a guarantee of 15% of the loan to the lender in order to encourage the bank or building society to offer the loan, in return for a fee. That fee charged to the lender is expected to be up to 0.9% of a property's sale price. This is a one-off fee dealt with entirely by the lender, which guarantees 15% of the mortgage for seven years.

However, all applicants will face stringent checks from the Council of Mortgage Lenders (CML) to make sure they can afford their mortgage payments.


An influential group of MPs has echoed concerns about the potential effect of the Help to Buy scheme. The group claimed that any mistakes could distort the housing market and “carry threats to financial stability,” in turn increasing prices of homes, but not the number of homes for sale. Chancellor, George Osborne however rejected this criticism, stating: "All the house builders 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."

If you feel you need any advice regarding your mortgages, or you feel the ‘Help to Buy’ scheme could affect you then one of our qualified advisers would be happy to respond to your initial queries FREE* of charge within 60 minutes during office hours.

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