But there are plenty of 95% deals available which aren’t being underpinned by taxpayers’ money, so who precisely is HTB helping?
The answer is that the scheme is probably more beneficial to the government and participating lenders than it is to homebuyers. The government are winners because the scheme gives the impression they are doing something to help stimulate the market while participating lenders are winners because they effectively get a taxpayer subsidised mortgage indemnity policy.
What about borrowers – what do they get?
They appear to get confused, according to research undertaken by the BSA. Its study shows that house buyers believe Help to Buy enables them to borrow more than a standard 95% loan, they believe the scheme will reduce their monthly mortgage repayments, they think the scheme gives them some sort of protection if they cannot keep up their mortgage repayments, they are under the illusion that Help to Buy will protect them if their house price falls and they think that they are more likely to be approved for a Help to Buy mortgage.
None of which is true.
Brokers should be under no illusion about Help to Buy. It’s no silver bullet and borrowers will still have to pass the same tough and inflexible credit scoring tests.
But there are alternatives. A number of building societies offer 95% mortgage deals. What’s more, they underwrite applications sensibly, using skilled underwriters who assess each case on its own merits. Plus, these deals are just as competitively priced as Help to Buy deals.
High LTV mortgages are out there and have been for some time. Help to Buy is not the only solution for borrowers struggling to raise a deposit.
Peter Izard is head of mortgages at Saffron for Intermediaries