Last week Mortgage Solutions polled brokers on whether their clients are seeing affordability problems with Help to Buy remortgages, now that equity loan repayments have begun.
Around one in five brokers reported their clients are having difficulties with affordability assessments, with almost two-thirds suggesting it is still too early to say.
The Help to Buy equity loan scheme launched just over five years ago, with the equity loans operating on an interest-free basis for that first five-year period.
A number of lenders have adopted new criteria towards Help to Buy equity loan remortgages, with Nationwide recently increasing the maximum LTV it will consider from 80% to 90%.
We need the big lenders
James Chidgey, new homes relationship manager at Mortgage Advice Bureau, said that while relatively few borrowers are currently experiencing these issues, it will soon ramp up.
Chidgey welcomed the fact that the focus this area is now receiving has pushed lenders like Nationwide and NatWest into adapting their propositions to better help remortgaging Help to Buy borrowers, but noted there is still a “lamentable number” of lenders interested in this area.
He continued: “Dealing with an equity loan is a little complex for some lenders – it can be a very convoluted process. That’s why the majority of lenders involved here are building societies and not mainstream lenders. But we need to get more lenders playing the game – we need the big lenders involved.”
We don’t want young mortgage prisoners
Nick Morrey, product technical manager at John Charcol, noted that while many lenders are happy to do a help-to-buy purchase loan, few would touch a remortgage without the equity loan being repaid, leaving borrowers with very little choice.
He continued: “I would like to see lenders being a little more relaxed in taking on the mortgage plus the new commitment as to become ‘mortgage prisoners’ in their 20s or early 30s seems a bit harsh.
“However, I understand that lenders have to use compliant affordability models. Also they cannot have one model for help-to-buy applicants and a different model for ‘normal’ borrowers since that could be a problem under TCF.”
Lenders need to change their approach
James Mole, independent financial adviser at Gingko Independent, said that while there are not enough lenders currently active in the market, over time this will likely change.
He added: “I would like the lenders to allow the borrowers on the scheme to add the equity loan amount to a standard remortgage with the same lender. They already check affordability based on having to make the equity loan repayment so I can’t see how affordability doesn’t work. It won’t happen, but we can hope.”