Help to Buy scheme: information
10 October 2013
The government launched the second phase of its Help to Buy scheme on 8 October 2013.
Under the second phase of the scheme, the government gives a guarantee to a participating lender when they lend to a buyer who has a small deposit of between 5-20 per cent of the purchase price. The government will guarantee up to 15 per cent of the loan to the lender.
In exchange for this, the lender will pay a fee. There are three tranches of borrowers. For those with a deposit of:
- 5-10 per cent, the fee will be 0.9 per cent of the loan
- 10-15 per cent, the fee will be 0.46 per cent of the loan
- 15-20 per cent, the fee will be 0.28 per cent of the loan
Lenders can participate in one, two or all three tranches. If a buyer has a deposit which falls into a tranche that the lender is participating in, the lender must use the Help to Buy scheme. This is to avoid exposing the Treasury to only the riskiest mortgages.
This part of Help to Buy is available to first-time buyers and people moving home who are purchasing properties valued at up to £600,000. The guarantee only applies for the first seven years of the mortgage.
Unlike the first phase of the scheme, which only applied to buyers wishing to purchase new-build homes, the second phase applies to the secondary market as well as new properties. The loans have to be capital repayment loans. The interest rates are likely to be higher than for non-Help to Buy loans.
These loans are now available from:
- Royal Bank of Scotland
- National Westminster Bank
- Lloyds Halifax
- HSBC
- Virgin Money
- Aldermore
We anticipate that most of the guarantees will be entered into from January 2014.
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