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Help To Buy Is Ending

 
 
 
 
  18 Oct 2016

Given that many people struggled to raise a suitable deposit to meet the requirements of the traditional lenders in the UK, there was a need to provide additional support to buyers. This led to the introduction of the Help To Buy Mortgage Guarantee Scheme which enabled lenders to provide loans to people for a deposit as low as 5%. As a scheme that was designed to prop up the UK property market and provide more support to first time buyers, it had its benefits but the need for this scheme has declined in recent years. It is with this backdrop that an announcement has been made that the Help To Buy Mortgage Guarantee Scheme will stop at the end of 2016.

While the change in tact at the head of the UK Government may have driven the change, there are two key factors that have led to this current situation:

  • There has been a notable decline in the use of this scheme
  • Mortgage lenders have issued figures which indicate that the provision of mortgages is rising

The fact that there are a number of options to lend to people with just a 5% deposit at a similar or even more affordable price available to the market means that there is no need for the Government intervention.

Bank of England believes this is the correct decision to make

There is understandably some concern about this change and whether it would lead to a decrease in people obtaining mortgages but this has been denied by the Bank of England. The Governor of the BofE, Mark Carney, issued a letter to the Chancellor stating the opinion of the Financial Policy Committee Judges saying that the scheme closing would be unlikely to impact on the provision of mortgages to interested candidates. Reference was also made to people included in the high loan to value demographic and a further assurance was made about their ability to obtain a mortgage to buy property.

There are also other Help To Buy schemes on offer and these will continue to be available next year. These other Help To Buy schemes include:

  • Equity loans which are provided to buy newly built property
  • Help To Buy ISA Savings schemes which assist people saving for a deposit

Proof of the decline of these mortgages was found in figures issued by the Financial Policy Committee. In 2014, Help To Buy mortgages accounted for 6% of lending in the initial quarter of the year. In 2016, Help To Buy mortgages accounted for 3% of lending in the initial quarter of the year.

With respect to deposits standing at less than 10% of the value of the property, Help To Buy mortgages accounted for 70% of the market in 2014 but in 2016, this figure had fallen to 25%.

The Help To Buy Mortgage Guarantee Scheme wasn’t universally supported at its launch

There were concerns at the time of the schemes launch that it would lead to the housing market becoming unstable, but this never materialised. There have been no findings of the scheme driving up house prices nor of the houses bought via the scheme rising in value. Part of this was backed by a cap being placed on loans which limited borrowers to claiming a sum of up to 4.5 times their income level.

At the moment, the mortgage market looks strong. Figures issued by the Council of Mortgage Lenders (CML) said that the August 2016 lending levels have been the highest of any August since 2007.

There is still time for interested parties to obtain a help To Buy Mortgage but anyone wishing to do so needs to act fast, the deadline is the end of 2016.

Straight Talking Independent Mortgage Advice

We understand how important a decision getting a mortgage is. It’s not just about taking out a mortgage, it’s about getting the keys to your new home, improving the one you’ve got or arranging your finances for the future so you know what your outgoings will be.

For further information, please contact our independent mortgage brokers on 020 8941 6706.

 

 


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Jezzards Estate Agents



 

 

Jezzards properties Hampton

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