Help to Buy brought forward – what does it mean for you?
Help to Buy Phase 2 has been brought forward three months, meaning that prospective homebuyers can start making applications to the scheme on the week beginning 7 October - how does that change things for you?
October 1, 2013
So what’s new?
Although the loans still won’t be available until January 2014, lenders will be able to start writing high loan-to-value mortgages (offering up to 95% of the value of buyers’ homes) which will be guaranteed by the scheme.
What does that mean for homebuyers?
You can find out for certain whether you will be accepted on to the scheme. And you can now start researching and comparing the mortgage products which will be publicised before the scheme kicks in January. Which this space for more details of how to apply and sign up to our newsletter to get the latest.
Which banks can I go to for a Help to Buy loan?
Banks that have officially signed up to Help to Buy are Halifax, RBS and Nat West. But other big lenders, such as Barclays, Santander, HSBC and Nationwide, haven’t committed themselves to taking part in the scheme.
This means that, even if they do take part, information on what they will offer may not be available until January. But hopefully, bringing the scheme forward will push some of the banks into making their position on the scheme clear.
Will I be able to buy a home under the scheme as soon as it launches?
No, you still have to wait until January for the scheme to actually get going. But at least you can start making plans based on the scheme without any suspicions that the Government will succumb to all the calls not to go ahead with it.
Is this going to set off a housing bubble?
Over the lifetime of the Help to Buy scheme, the Bank of England’s Financial Policy Committee (FPC) will make annual reviews, starting next September to ensure it is not causing a bubble. This is sure to calm concerns over housing bubbles.
Although a lot of people are already worried that we’re in a housing bubble at the moment, the Bank of England’s mortgage findings don’t support this: official statistics show that mortgage lending is around half the level it was before the economic crisis, even though mortgage rates are at their lowest for five years.
How long will Help to Buy run for?
The plan is to run form January 2014 until December 2017 but it will be closely monitored and the Bank of England will be able to stop it if it believes it is causing a housing bubble.
But you might want to get on the scheme as soon as possible, rather than waiting to see how it goes. Apart from the fact that it may not run for the proposed three years, it could also push up house prices leaving you with a much bigger mortgage to pay off in the end.
Recap: what does the second stage of Help to Buy mean?
The Government has promised to guarantee 15% of the value of mortgages on houses that cost less than £600,000.
This will allow buyers to get a mortgage even if they can only afford 5% of the deposit.
You can start applying as of 7 October and will be able to use the scheme from 1 January 2014.