UK Help-to-buy scheme

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UK Help-to-buy scheme
A mortgage supported by the Help to Buy scheme works in the same way as any other mortgage except that under the scheme, the Government offers lenders the option to purchase a guarantee on mortgage loans.
Because of this support, lenders taking part are able to offer home buyers more high-loan-to-value mortgages (up to 95%). So, if a buyer pays a 5% deposit then they will need to take out and pay back a 95% mortgage. The buyer will be fully responsible for their mortgage repayments.



The Mortgage Guarantee scheme can only be used for property you intend to occupy, and must be your only property. Nor is it just for first time buyers. Within certain parameters, any buyer can benefit so long as it is a residential repayment mortgage and not a buy-to-let.
If a buyer can afford to contribute more in the way of a deposit then the improved lending environment should mean more competitive rates for those with a 10% to 20% deposit. For those with 5% deposit this government underwritten scheme is the only real option.
There is a popular misconception that the scheme is for new build properties only. This is not the case. There is a further scheme designed to help individuals and families to buy new build homes (called the Equity Loan scheme). This works in a similar way but is for new-build properties only. The Mortgage Guarantee phase of Help to Buy is available across the UK. The equity loan phase of Help to Buy is available in England and is for new-build properties only up to £600,000. Scotland has just launched a new build-only Equity Loan scheme called Help to Buy (Scotland), for properties up to £400,000.
There is a fear that the Help to Buy scheme is creating an over-buoyant marketplace and leading to false price inflation. Over stimulating the market could lead to house prices increasing sharply and indeed in some areas of the country prices have taken a sharp rise, but it is important to remember that property prices do go up and down depending on a number of factors. It is also worth remembering that house prices are still lower today in some parts of the country compared to six years ago. This is part influenced by the difficulty that buyers have experienced in obtaining mortgages since the start of the global financial crisis. The scheme was not designed to run forever, in fact it is only scheduled to last for three years. It started as a method to make house buying more accessible to more people. At the end of this period the hope is that the mortgage market and the economy more generally should be in a better place than at the outset.