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Help to Buy mortgage guarantee scheme ends this month

At the end of December phase two of the Help to Buy scheme is going to be withdrawn by the government after a successful three years.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

Use your dashboard to access online mortgage quotes, money off vouchers and start your mortgage application online 24/7 on desktop, tablet or smartphone.


Mortgage Best Buys

These are examples of mortgage products we can approach with many more offering interest rates and flexibility to meet your needs.

1.47% Tracker Rate
60% Loan to Value
£1,024 Lenders Fee
Until 2-Years Time
Reverts to 4.24%
1.44% Tracker Rate
60% Loan to Value
£1,034 Lenders Fee
Until 2-Years Time
Reverts to 5.24%
1.27% Fixed Rate
60% Loan to Value
£1,510 Lenders Fee
Until 30/11/2021
Reverts to 4.74%
1.21% Fixed Rate
60% Loan to Value
£1,034 Lenders Fee
Until 30/10/2021
Reverts to 4.24%

The latest mortgage news


21 Feb 2018

London remortgage buyers at eight year with flat growth in first time buyers

The number of remortgage buyers in the capital has reached an eight year high in 2017 driven by competitive mortgage rates.

17 Feb 2018

First time buyers are £27,000 better off than renters by owning a home

Costs to first time buyers are £900 per year less compared to renters and over their mortgage term buying a home saves them £27,000.

13 Feb 2018

House prices growth in South West is highest in England, says ONS

Properties in the South West of England are rising at 7.5% over the year compared to the slowest region of London with growth of only 2.5%.

02 Feb 2018

Affordability for city homebuyers reaches worst level for ten years

The rapid rise of house prices in cities has outstripped earnings and means affordability levels have reached a ten year low.

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    Equity Release may involve a Lifetime Mortgage or a Home Reversion Scheme. To understand the features and risks, please ask for a personalised illustration. Equity Release may affect your entitlement to means tested state benefits and will impact on the size of your estate. For Equity Release London City Mortgages charge a fixed fee upon completion of £695. For Mortgages a fixed fee is charged on application. Typically this is from £295 up to £495 for the services selected.

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