At the end of December phase two of the Help to Buy scheme is going to be withdrawn by the government after a successful three years.

The Mortgage Guarantee was the second phase of the Help to Buy scheme starting on 8 October 2013 and ending this month on 31 December 2016.

Help to Buy has supported over 80,000 new homeowners since launch including first time buyers and home movers with 94% of these homes bought outside of London with an average price of £185,000.

The scheme will continue with phase one called Equity Loan for those buying new build properties until 2020 allowing them to buy with smaller deposits or more expensive properties such as in London.

Competition from buy-to-let investors and reduced supply of suitable properties, has made it difficult for prospective first time buyers with many continuing to rent and saving for a bigger deposit.

Help to Buy achieved its goal

The Chancellor Philip Hammond said the Help to Buy scheme and it had successfully achieved its purpose to kick start the mortgage market.

According to Moneyfacts, the scheme has had a very positive influence on increasing the number of 95% loan to value (LTV) mortgages.

The number of mortgages requiring only 5% deposit outside of Help to Buy have increased from 56 in October 2013 to 269 by December 2016 as the following table shows:

Date	95% LTV products	Two-year fixed rate
Oct 2013	56	5.74%
Dec 2013	109	5.10%
Dec 2014	179	5.22%
Dec 2015	246	4.32%
Dec 2016	269	3.91%

At the same time mortgage rates have reduced over this time period with the average two year fixed rate 95% LTV falling from 5.74% three years ago to 3.91% today, says moneyfacts.

The Financial Policy Committee (FPC) also said the Help to Buy was in decline accounting for 6% of total mortgage lending in 2014 and only 3% in the first quarter 2016.

Help for first time buyers can come from older homeowners as the equity release buyer can access wealth using a lifetime mortgage and give a child or grandchild the deposit on their first home.

More choice for first time buyers

More competition in the market has meant first time buyers have greater choice and Help to Buy has achieved its original aim of attracting lenders offering mortgages requiring 5% deposits.

The Help to Buy equity loan scheme is scheduled to run until 31 March 2020 and offers first time buyers or home movers a 20% interest free loan for five years.

In London the loan is up to 40% on new build properties valued up to £600,000.

Homebuyers only need a 5% deposit yet the government loan of 40% is treated as capital with the balance of 55% being a mortgage from the lender.

Although the scheme can look attractive initially, in five years time you would need to pay interest of 1.75% on the capital loan as well as the lender's mortgage.

The scheme is only available for new build homes and you must payback the loan after 25 years although you can repay the loan from the government at any time without penalty.

What are your next steps?

Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.

Start with a free mortgage quote or call us and we can take your details. Learn more by using the property value tracker chart, mortgage cost calculator and equity release calculator.

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property to repay an interest only mortgage, holidays or home improvements.

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