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Help to Buy regenerated the high LTV mortgage market – Moneyfacts

  • 31/05/2016
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The government’s Help to Buy mortgage guarantee scheme is set to wind up before the end of the year, having been credited with the expansion of the high loan-to-value (LTV) mortgage market.

The scheme was set up in October 2013 with the aim of helping first-time buyers (FTBs) with smaller deposits buy  with the government offering lenders the option to purchase a guarantee of payment. said that since the scheme was introduced the market for 95% LTV mortgages has jumped from 56 products at scheme launch to 271 today.

Finance expert Charlotte Nelson said: “First-time buyers everywhere, regardless of whether they took advantage of the scheme or not, have a lot to thank it for – essentially, it acted as a catalyst for lending at 95% LTV and helped to bring a measure of normalcy back to the market,” she said.

“As a result, the number of products available at 95% LTV has increased by 383% since the start of the scheme.

“Before the initiative was announced, borrowers with a deposit of just 5% would have struggled to find a mortgage as many of the products on offer were only available to local areas or required a parent or guardian to guarantee the loan. If a borrower managed to find a suitable offer, the cost of the mortgage repayments was high. Today, the cost of a mortgage at this LTV is substantially cheaper; for example, the average rate of a two-year fixed rate mortgage at 95% LTV has fallen by a whopping 1.59% since October 2013.”

Nelson said that borrowers considering a Help to Buy mortgage now should always consider the rest of the market, as lenders may be offering better deals than those available through the scheme.

“For instance, the best five-year fixed rate mortgage at 95% LTV from the Help to Buy scheme is priced at 4.48% today; however, the best rate available overall stands at 3.79%,” she said.

She said there is a risk that the removal of the scheme will slow progress for borrowers but that those with smaller deposits are in a better position now than they have been since the financial crisis.

“They should take advantage of the deals available now to avoid disappointment in the future,” she said.

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