While Help to Buy 1 – the shared equity element – was extended quite quickly until the end of the decade, perhaps even longer, Help to Buy 2’s three-year term will be finished at the end of next year. Given this is the case, and perhaps with a feeling that Help to Buy activity has plateaued, it has been quite right to ask how those lenders involved in the mortgage guarantee scheme will move forward with regard to high loan-to-value (LTV) lending once it ends?
Up until now there has been little information in this regard, however, over the past week, two lenders in particular – Nationwide and Santander – appear to have signalled their ongoing commitment to high LTV lending once the scheme ends. Indeed, there is an argument to suggest that their focus is already moving outside Help to Buy 2 given the announcements made.
Firstly, Nationwide announced recently that it would be putting £1bn into its new range of 95% LTV loans, with Santander following with the announcement shortly after that it was introducing a 95% LTV range which would also operate outside the Help to Buy 2 scheme.
Positive move forward
So, it would appear that lenders active in the mortgage guarantee scheme are beginning to answer the ‘What happens next?’ question when it comes to their appetite for high LTV lending, and one can’t help but say this appears to be a positive move forward. Whether others will follow suit is difficult to predict, indeed they may opt to use private mortgage insurance post-HTB2, having become comfortable with the state guarantee. Continuing with this culture of protecting high-LTV lending through transfer of risk can only be a good thing for the market and with the private mortgage insurance sector more vibrant than its ever been, we hope this culture continues after Help to Buy 2 ends.
The first-time buyer market in particular needs further announcements like that of Nationwide and Santander. Our own recent research has shown that the average deposit required by a first-timer still lies at 20%, a huge £31,807 based on the average price of a property bought by them being £159,035. Utilising a 5% deposit would drop that figure down to just shy of £8,000 – still a lot of money but much more manageable to save than £31,000-plus.
It is to be hoped therefore that in the weeks and months ahead we see further lender commitment in this area and that the attraction of protecting high-LTV lending continues when the scheme eventually finishes.