The government-backed Help to Buy home-loan scheme continues to offer vital support to the mortgage market two years after its launch, analyst Moneyfacts.co.uk says.
Since the introduction of phase two of Help to Buy – which gave lenders a state guarantee of 15% of each loan – in October 2013, the 95% loan-to-value (LTV) market has changed dramatically, the firm says. Chiefly, this has led to lower rates for borrowers with lower deposits and a huge increase in product availability in the 95% LTV range.
Charlotte Nelson at Moneyfacts.co.uk said: “The Help to Buy Mortgage Guarantee Scheme has brought many happy returns to small deposit holders. The scheme was designed to boost lending at 95% LTV, which is often considered the lifeblood of the mortgage market, and two years on, it’s clear that it has succeeded, with the number of homes being sold as a result of the guarantee hitting 56,401.”
Nelson added that the average two-year fixed rate mortgage at 95% LTV had fallen by 0.65% in just two years.
“The launch of Help to Buy acted as a crucial catalyst, promoting the acceptability of lending at this level again,” Nelson said. “It also prompted lenders outside of the scheme to drop their rates in order to remain competitive.
“However, with more choice on the market, borrowers need avoid being sucked in by the branding of the Help to Buy scheme, as many will actually now find better deals elsewhere. For example, by opting for lowest five-year fixed rate at 95% LTV instead of the lowest Help to Buy rate, a borrower could save £308.76 in repayments in just one year.”