Wednesday 5 October 2016
Changes to Help to Buy – the facts explained
News broke this week that the Government’s Help to Buy mortgage guarantee scheme will close to new mortgage applications on 31 December this year.
Part of the original Help to Buy programme launched in 2013 to boost home ownership, more than 86,000 home buyers have used it to buy a property.
This scheme has always been set to finish at the end of 2016 and there are still other Help to Buy products available which will help home owners either get onto, or move up, the property ladder.
We take a look at the facts, and how you can still use Help to Buy to purchase your dream Story home.
What was the Help to Buy: Mortgage Guarantee Scheme?
This scheme was designed to help buyers who had small deposits to put towards their home.
Rather than benefiting the customer directly, the scheme gave confidence to lenders that they would offer a 5% deposit mortgage but only take the risk of offering a 20% deposit mortgage, with the Government backing the 15%.
It was available on both new build on older homes.
Why is it ending?
The Mortgage Guarantee Scheme was always due to end on this date, however some lenders had called on the Government to renew it. The Chancellor Philip Hammond made the decision to end the scheme on the planned date, saying that its specific purpose had been successfully achieved.
He said that the market had now become considerable less reliant on the Mortgage Guarantee Scheme with more than 30 lenders who now offer 90 – 95% mortgages independent of the scheme.
That means that customers looking to secure a mortgage with a low deposit should still be able to, without the support of the Government.
What other part of the Help to Buy scheme will remain?
The Help to Buy ISA is specifically aimed at first-time buyers. They can save up to £200 into the ISA every month, with the Government adding 25% on top to help buyers build up their deposit.
The Help to Buy Equity Loan Scheme is for any new build buyer with a deposit of at least 5%. The Government will lend customers up to 20% of the property price interest free for the first five years. The loan allows buyers to access cheaper mortgage products with only a 75% mortgage requirement from their lender. This scheme is open to any customer buying a new build property and only applies in England and Wales.
If you are interested in using a Help to Buy product to purchase your dream house with Story Homes, we recommend speaking to an Independent Financial Advisor.