Help to Buy confuses, disappoints... and sells

Help to Buy 2 has left potential buyers confused about what help is available and disappointed because there are better rates outside the scheme, but it is helping to sell houses.

It should also help stimulate competition, as one specialist insurer has just outlined its private alternative to the controversial government scheme.

One in four people looking to buy their first home in the next 12 months are "disappointed" with the Help to Buy scheme, while seven out of 10 claim phases one and two were "confusing".

In a poll of 1,825 UK adults by website VoucherCodesPro, nearly one in three dismissed phase one of the Help to Buy scheme as a "glorified loan".

Two-thirds said rates on phase two weren’t as low as they were expecting, while more than half said it sounded like it wouldn’t last long enough.

Just one in five said they would definitely use Help to Buy.

Spokesperson George Charles said: “Help to Buy is, in principal, a great idea. However, phase one essentially leaves the homebuyer owing money to their mortgage provider and the government and if they don’t pay the amount back in the first five years then plenty of interest will get whacked on. 

“Phase two definitely sounds like the better option, because the agreement is largely between the lender and the government and there seems to be less risk.

"I’m not surprised that so many first-time buyers find it confusing, however, because there is quite a lot to get your head around.” 

But the scheme is helping to sell houses, with housebuilder Bellway's latest results showing that the the first stage of the scheme was used in 29% of reservations between launch in April and the end of July.

Chairman John Watson said: “There has been a significant improvement in trading conditions during the year, largely stimulated through wider access to more affordable, higher LTV mortgages.

“The Help to Buy scheme has had a significant effect on the housing market, improving mortgage availability and helping to satisfy previously restrained consumer demand.” 

Mortgage insurance provider Genworth has outlined its private alternative to the Help to Buy mortgage guarantee, a bespoke arrangement for lenders aiming to increase their high-LTV lending.

The Prudential Regulatory Authority's decision to make capital for to Help to Buy participants available to private mortgage insurers with similar contractual terms allows Genworth to offer lenders a product alternative. 

Vice-president Simon Crone said: “While we support the concept of Government Help to Buy, it is vitally important that lenders and consumers have more than one option.

"Our private alternative allows bespoke cover and more competitive conditions, particularly for the more prudent lenders, who would probably like to see their approach and performance recognised with differentiated terms and conditions."

Genworth said its range of private insurance products include:

·          Bespoke cover and premium options rather than ‘one price fits all’.

·          Single upfront premiums with no threat of retrospective increases in price.

·          Greater certainty and stability on a term longer than one to three years, since the product offering is not limited by time or amount and not subject to changes in government policy priorities.

·          The ability to go beyond a £600,000 house price limit and consider niche products.

·          A bespoke administration process working with the lender to determine the data and reporting requirements.

·         Claims and other processing managed in-house not by a third-party administrator new to the market.

·          A delegated lending authority working with the lender’s criteria and agreed audit requirements.

·          The ability to refer to Genworth for individual underwriting  providing the lender with the opportunity to seek approval for a case that might not meet all the lending criteria yet is deemed a good risk.

·          Added-value services as standard such as credit scoring, arrears management and risk reporting.

·          Solutions on in-force as well as go-forward lending portfolios with only one initial set-up project.

·          Claims submitted to a private company are not subject to ‘bail out’ reputational issues.