The scheme will be open to home buyers with a five per cent deposit, not just first-time buyers, for properties worth up to £600,000. It has been largely modelled on the previous Help to Buy scheme launched in 2013 to help lenders transition back in to the market, and is open to second hand properties not just new-build.
Sunak confirmed the UK’s biggest banks are poised to lend on the scheme from mid-April, include Lloyds, NatWest, Santander, Barclays and HSBC with Virgin Money readying to launch in May.
All mortgages will need to be repayment, not interest-only on a loan to value of between 91 to 95 per cent and are subject to the usual affordability rules. All participating lenders will also be required to offer a five-year fixed rate product as part of its guaranteed range of mortgages.
He said: “To quote the Prime Minister, we will turn generation rent into generation buy.”
HSBC’s head of buying a home, Michelle Andrews, said: “We’re delighted to once again be supporting the Government Help to Buy scheme. Here at HSBC UK we’re committed to supporting people to get on to, or move up the property ladder. This scheme will make a real difference in enabling more first-time buyers and home movers, with a minimum of 5 per cent deposit, to get the keys to their new home, and we’re excited to play our part in it.”
A Santander spokesperson said it had no product details yet but they would be available through intermediaries, branches and over the phone.
Mortgage broker, Hiten Ganatra, Visionary Finance said: “The mortgage guarantee scheme will help open up options within the second hand property market and it’s incredible that so many lenders are already on board and will be rolling out products by April.”
He added: “The key to success of the guarantee scheme will determined by the competitiveness of the mortgage rates being offered to those looking to use it.”
Stock market-listed mortgage broker firm Mortgage Advice Bureau is already listing the product on its website.
The scheme will be open for new mortgage applications from April 2021 to December 2022, reflecting the government view that the scarcity of high loan-to-value lending is primarily a response to the pandemic rather than a more structural problem.
The government will review the continuing need for the scheme towards the planned end date and has capped the bill for the scheme at £3.9bn.
Fears remain that the already hot property market with rising house prices driven up by the Stamp Duty Land Tax (SDLT) holiday, which has been extended today, could be driven ever-higher after this move.
The banks’ trade association proposed creating a new company which would oversee the functions of open banking for the long-term.
The proposed new organisation could begin operating as early as next year.
“This spells the end of big, dumb mortgage products manufactured without consideration for the end consumer,” said Dr Louise Beaumont, chair of the open finance and payments working group at TechUK.
“Mortgages will be bespoke for the individual, based on what data they choose to share with the provider. And the products will flex, as the individual’s circumstances change, again based on the flow of data,” she said.
UK Finance’s proposals follow an initial period of work by the Open Banking Implementation Entity (OBIE), which was funded by the big banks. OBIE was a response to a Competition and Markets Authority order in 2016 based on the banks not competing hard enough for customers’ business.
The nine lenders involved, known as the CMA9, were Allied Irish Banks, Bank of Ireland, Barclays, Danske, HSBC, Lloyds, Nationwide, NatWest and Santander.
Banking technology provider Yobota also welcomed the UK Finance paper — and urged the banks to address legacy system issues to support the transition.
“This is a major step forward in our journey to open finance. Mortgages, pensions and insurance products all stand to benefit from increased competition to enable consumers to make more informed decisions regarding their personal finances,” said Ammar Akhtar, chief executive at Yobota.
“We must expand the open banking model to the corners of the market that continue to be riddled with inefficiencies,” he said.
“I hope to see more emphasis on helping financial services companies bring their underlying technology into the modern era. Without modern core systems, the industry will be stuck building layers of apps on top of existing legacy systems,” Akhtar added.
Fitness apps and online retail data
The industry’s journey to open banking will likely move through the stage of open finance, then open data.
Open finance is where data is sourced from financial organisations like insurers. Open data brings in information from a wider range of sources such as fitness apps or online retailers.
“Open banking is a world leading innovation with huge potential to make our financial lives much safer and more convenient,” said a spokesperson for UK Finance.
“It provides a secure way for financial information to be shared across different finance providers with customers’ consent. This can enable services such as account aggregation, where customers can see all their accounts with different providers in one place, as well as the ability to make direct payments through a third party provider from a bank or building society account.
“Open banking can also facilitate services that help customers shop around for banking and credit services, or to support lending decisions through credit analysis,” the spokesperson said.
The move is expected to result in better outcomes for customers specifically by stimulating competition.
“Open banking has a rich and valuable future, building from humble beginnings in the banking sphere to open finance and through to the rich, sunlit uplands of open data. This means an ever-richer suite of data to pull into ever-more valuable services — hyper-personalised, predictive and pre-emptive services,” said Dr Beaumont.
“It’s time to to unleash your imagination and think about the data you need to create genuinely valuable services and to leave lumpen, inflexible products behind,” she said.
New enabling organisation
The UK Finance paper, Open bank futures: blueprint and transition plan, lays out ideas for structuring and funding the new enabling organisation and describes the potential scope of its activity.
Its proposed overall purpose is, “to help consumers, small business and corporates to benefit from an efficient, safe and reliable open data and payments market, and to provide a platform to support financial institutions to meet regulatory requirements.”
The paper sets out the proposed functions of new entity, such as holding and maintaining technical standards, providing core services such as a help desk and directory, enabling regulatory compliance, acting as an effective point of escalation and resolution, and advocating for open data and payments.
The organisation’s key performance indicators are outlined too.
They are: widespread adoption of open data and payments propositions, highly secure and reliable provision of services, keeping the UK at the forefront of innovation in open application programming interface (API) propositions, ensuring those in vulnerable situations are able to experience equal benefits of open data and payments propositions, and preventing poor customer outcomes.
The equity buffer will rise from £150,000 to £250,000 with effect from Wednesday 24 February.
Santander offers interest-only mortgages, up to a maximum 50 per cent loan to value (LTV), and part interest-only, part capital and repayment mortgages, up to 85 per cent LTV.
For interest-only the £250,000 will be based on the deposit and equity at application. And for part and part, the £250,000 will be calculated on the equity at the end of the mortgage term.
Helen Harrison, head of intermediary distribution, Santander (pictured) said: “We last reviewed our interest-only buffer in 2016, when Office for National Statistics (ONS) data showed the average house price stood at around £205,000.
“At the end of 2020, the same data showed the average house price was nearer £250,000. By increasing our IO buffer we are ensuring customers have strengthened resources when they to need to sell-up and downsize to another property at the end of their IO term.”
But the bank said it had maintained its market share for new mortgage lending despite UK lending only shrinking by 10 per cent due to the coronavirus pandemic.
It has also predicted a drop of two per cent for house prices over the course of 2021, but believes mortgage market lending will grow at around two per cent.
This would claw back some of the overall drop in mortgage lending from £267.7bn in 2019 to £241.2bn in 2020 which the Bank of England reported this week.
As part of its end of year management statement, Santander revealed lending to first-time buyers dipped from £7bn to £5.4bn, however buy-to-let completions edged up from £2.5bn to £2.6bn.
It also revealed 89 per cent of the 251,000 mortgage holders it granted payment holidays to were back up to date, eight per cent had remained in a payment holiday, with two per cent now in arrears following the deferral period.
In total £2.5bn worth of mortgages was still in a payment holiday at the end of the year out of the original £37.1bn worth that were granted.
The lender said it had seen margin pressure on its back book, including £1.8bn worth of mortgages coming off its standard variable rate.
But it added that 81 per cent of its refinanced mortgages were retained online, up four per cent from 2019.
And as a result its overall mortgage book grew by £4.4bn to £168bn, with the proportion of lending on fixed rates rising to 80 per cent of the book.
House price dip forecast
Looking towards 2021, Santander anticipated mortgage market lending growth of around two per cent, with house prices falling by around two per cent, and it predicts its hit from loan defaults to be lower than previously expected.
“With further lockdown restrictions imposed in January 2021, the UK economic environment remains challenging,” it said.
“Our base case assumes some form of restrictions are still in place in Q2 21 and growth recovers over the latter part of the year as the vaccine rollout continues and businesses become more familiar with the new EU trading environment.
“With the pace of future recovery closely linked to the vaccine rollout, we remain cautious in our outlook.”
It also expects net mortgage lending to be in line with market growth and the net interest margin to be in line with the rate at the end of the year, based on stable mortgage margins and no change to the Bank of England base rate.
The lender has now opened its 90 per cent LTV products to all mover types – it initially re-launched with two five-year fixed first-time buyer only products.
And it has added a pair of two-year fixes to the range at 3.55 per cent with a £999 fee and at 3.74 per cent with £0 fee – both 0.05 per cent lower than the five-year equivalents.
Rate cuts
Santander has cut rates on 13 products at 60 per cent LTV by up to 0.15 per cent.
The largest reduction has come on the two-year fix for purchases with zero fee which has been cut to 1.64 per cent, while the five-year version has been trimmed 0.08 per cent to 1.85 per cent.
Two Help to Buy deals with standard and nine-month completions have also been reduced by 0.14 per cent to 1.64 per cent and 1.69 per cent respectively.
“We’ve been working hard to improve our service so we can continue supporting you and your clients, and we’re now in a strong position to be able to improve our pricing,” the lender said.
“On Tuesday 2 February, we’re widening availability of our 90 per cent LTV fixed rates to all mover types and expanding the 90 per cent LTV range by adding new two year fixed rates.
“We’re also reducing residential and selected Help to Buy 60 per cent LTV two and five-year fixed rates up to 0.15 per cent.”
The products can be applied for through a broker, directly from the Santander website or in branch.
These include a five-year fixed with a £999 fee at 3.6 per cent and a fee-free equivalent with a rate of 3.79 per cent.
Helen Harrison (pictured), head of intermediary distribution at Santander, said: “We’re pleased to announce these new 90 per cent LTV mortgage products and to be able to support more first-time buyers with smaller deposits on their journey towards homeownership.”
The Nottingham BS
The Nottingham Building Society have also launched two mortgages at 90 per cent LTV, two weeks after it returned to the 85 per cent LTV lending space.
The five-year fixes are available from today and include a fee-free product with a rate of 3.7 per cent as well as a £999 option at 3.45 per cent.
The mutual has also launched deals for those with slightly bigger deposits or more equity in their homes.
These include fee-free 80 per cent LTVs with a two-year fix at 2.3 per cent and a three-year fix at 2.6 per cent. There is also a two-year fixed mortgage with a rate of two per cent. This product has a fee of £999.
At 85 per cent LTV, there is a three-year fixed with a rate of 2.9 per cent.
Nikki Warren-Dean, head of intermediary sales, said: “We’ve been working very hard behind the scenes to be able to bring back 90 per cent LTV mortgages.
“Buying property is never easy, and that has undoubtedly become more challenging due to the Covid-19 pandemic. We were always looking to return to this space and to help people with smaller deposits, however, it was important to do so in a measured and responsible way.”
“We are delighted to be able to unveil products that could help make house moves or remortgages that in 2020 may have looked impossible, possible.”
Santander
Santander has announced any mortgage applications submitted from 1 January will no longer be granted a two month extension to enable completion.
In March last year, lenders agreed to extend mortgage offers by up to three months to allow customers time to complete transactions amid the closure of the property market and subsequent delays along the chain.
Now, applications submitted to the bank after 1 January will be processed in line with Santander’s existing offer validity of three months.
No extra action needs to be taken for applications which have already been submitted or received an offer, but Santander said brokers should inform them if there are any material changes.
The bank also said reversion back to three-month offers would still allow new applicants to meet the stamp duty holiday deadline.
Helen Harrison, head of intermediary distribution at Santander said: “We know that with the current volume of homebuyers in the market, and the challenges presented by Covid-19, some customers may be finding the buying process is taking longer than usual.
“For customers with mortgage offers that were due to expire soon, our automatic two month extension will provide peace of mind allowing them to focus on progressing their purchase.”
NatWest
NatWest is reverting the window to refund a mortgage porting to four months, in line with conditions before the Covid-19 pandemic.
Applications fully submitted before 31 January will still be entitled to a porting refund window of six months, while applications made from 1 February onwards will go back to the shorter original timeframe.
This follows a partnership between the two companies in 2019, where Santander joined the surveyor firm to offer HomeFact, a mortgage product for first-time buyers with a free condition report.
Paul Wareham, managing director of business to business at Countrywide, said: “This renewal represents faith in our proposition and we will continue working innovatively with Santander to deliver a consistently great service for the bank and its customers.”
David House, chief surveyor, head of residential valuation at Santander UK, added: “The appointment of Countrywide Surveying Services as lead valuer is well deserved and a reflection of the ongoing strength of our relationship.
“Their service to the bank and its customers during this challenging year has been outstanding. I look forward to our future collaboration in enhancing the customer experience and bringing innovative projects to market.”
The restriction, which the bank said was a temporary measure, applies to all new residential applications where any borrower is self-employed.
In an email to brokers, the bank explained the decision had been made following the government’s decision to impose further lockdown restrictions and close schools. The move, it said, would help the bank to manage its pipeline cases.
Santander had already imposed stricter requirements on self-employed borrowers such as asking for borrowers to explain why their businesses had not been affected by Covid-19 and how their income would continue to be sustainable under lockdown restrictions.
Any borrowers whose businesses are currently not trading cannot use their income to support the mortgage application.
Andrew Montlake, managing director of Coreco, said: “We all understand why lenders have to manage their pipeline carefully and this is one way to do it. However, it is a shame that yet again decent self-employed customers are taking the hit.”
Helen Harrison, head of intermediary distribution at Santander, said: “Due to the additional paperwork involved, applications from self-employed customers can take longer to review and, in view of our current service times, our recent changes will ensure we can progress existing applications as quickly as possible.”
Existing self-employed borrowers who are porting a mortgage will be eligible for a mortgage up to 85 per cent LTV.
All full mortgage applications already submitted on the bank’s introducer system by 9pm on Friday 8 January will not be affected.
The new criteria will apply to all applications made from Saturday 9 January.
