Importantly for the mortgage industry, it is also the fifth anniversary of the start of the Help to Buy equity loan schemes.
Set up to assist first-time-buyers on to the property ladder, over the next few weeks these homeowners will begin the process of paying back the government loan.
This loan can be repaid in a lump sum, or in more manageable monthly instalments.
A home purchase, especially a first home, brings with it a list of costs – including furniture and white good items, living costs and bills, as well as the unexpected.
This government loan may have been a somewhat distant consideration and one that had taken a back seat – but it is now very much to the fore.
The next few weeks and months are critical for advisers to help these borrowers meet their increased commitments.
New product?
In some cases, where the property has markedly increased in price, the borrower may be able to remortgage and effectively pay off the government.
To do this, the borrower will need to meet revised affordability rules for their new deal.
However, new build properties, which were the criteria for Help to Buy eligibility, rarely rise in price at the same pace as existing properties.
As a result, this remortgaging element may only be open to a select few.
It is clear therefore, that this remortgage option won’t be the case for everyone, and in fact we may see a whole new product, designed to support clients in meeting their increasing financial commitments.
We may also see product transfers come into greater use as borrowers look to manage their mortgage and government loan more effectively.
More lender activity
Regrettably, we could see some borrowers really struggle.
Wage growth has stagnated over recent years, and although interest rates have not risen sharply, rate rises are predicted for the next six-to-12 months.
These should all be on your radar to flag to clients and advisers should be proactively revisiting these borrowers to help them find the best solution.
At TMA, we have already held discussions with lenders about their offering to these clients and we expect to see more lenders being more active in this area of the market.
We realise the importance of helping these borrowers remain on the property ladder and steady their footing.
Constant dialogue
Regardless of their initial product, advisers should be focusing on these Help to Buy borrowers to ensure they are aware of their obligations and their options for minimising disruption to their monthly repayments, while committing to paying the government back – as well as their continued mortgage commitments.
The Help to Buy scheme has undoubtedly helped to boost the options available to borrowers eager to get onto the housing ladder.
However, it is clear there needs to be a constant dialogue with borrowers who opted for this product so that advisers can provide the best bespoke solution to clients.
