The second phase of the Help to Buy scheme launched by the government is likely to see mortgage costs at 5%.

Three of the largest providers Barclays, Santander and Nationwide Building Society were considering the details before deciding if they wanted to participate.

The first phase of the Help to Buy Scheme was directed to first-time buyers of newly-built properties only.

This latest phase is open to a wider audience applying to old and new properties with a cost of £600,000 or less as well as all buyers looking for a mortgage, not just first time buyers.

How do rates compare

The Halifax intends to take mortgage applications offering 5.19% with a fee of £995 fee and a 5% deposit.

Both the RBS and NatWest are offering a two-year fixed rate mortgage with a rate of 4.99% and also a 5% deposit but with no fee.

These Help to Buy rates compare with the current rates such as the Yorkshire Bank offering a mortgage for 5.49% fixed for three years, a 5% deposit and no arrangement fee.

With a larger deposit of 25% the Help to Buy scheme looks expensive as Santander offers 2.49% and an arrangement fee of £495.

With 35% deposit the Coventry Building Society is offering a 2.15% mortgage and fee of £199.

This compares to the equity release mortgage buyer where fixed rates can be secured typically from 5.9% upwards for a lifetime mortgage without any evidence of earnings, important for borrowers with only pension income.

For home movers the deposit on a new property is usually higher as equity has increased since the financial crisis.

Benefits of Help to Buy

The advantage of phase one Help to Buy is the lower deposit and equity loan. In phase one the government interest free equity loan is 20%, deposit of only 5% from the borrower with the remaining 75% being a mortgage from a lender.

In phase two the government provide a guarantee of 15% of the property value to the lender. There is a charge to the lender of up to 0.9% which guarantees this portion of the mortgage for seven years.

The homebuyer only needs to have a 5% deposit but must secure a 95% mortgage from a participating lender.

Properties can cost up to £600,000 to qualify and the scheme which is expected to last for three years. It is available to old homes as well as new builds and now all buyers are eligible including home movers, not just first time buyers.

The Help to Buy scheme promotes new homeownership for people that are renting and is not available to switching remortgage buyers or buy-to-let investors.

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.

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

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property to consolidate debt, holidays or even buy a more expensive home.

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