First-time buyers in the Help to Buy scheme can expect to see mortgage rates in the “low” 5 per cent range if they get a 95 per cent loan to value, Ray Boulger, senior technical manager at broker John Charcol said, warning that the government-backed initiative could cause house prices to rapidly rise.
The second phase of the government’s Help to Buy scheme was supposed to launch today (7 October), but it is now expected tomorrow (8 October), around three months earlier than anticipated.
There has been much speculation what impact this has been on the market. However, Mr Boulger has warned that those first-time buyers looking for a 95 per cent mortgage will not get a preferential rate and expects to see rates that are in the “low” 5 per cent range.
He said: “This route will not mean cheaper mortgages; it will increase availability but not lower rates. First-time buyers will be paying a big premium but some people will want to do that.”
Mr Boulger also acknowledged market apprehension about what the impact will be, warning that it is likely property prices will rise.
He said: “Clearly in parts where the market is strong, it will make it even stronger so that is why there is a greater risk that prices will be brought up quickly.
“Clearly if we get more demand for property prices, will be higher but this means people will have to be more flexible about where they buy. It will be a balancing act.”
The Lloyds group confirmed that Halifax and the Bank of Scotland will be offering Help to Buy immediately. Aldermore and Natwest have confirmed to FTAdviser it is committed to it, with the former set to offer it from January.
Mr Boulger said: “Take-up by lenders is slow and some lenders will end up not participating; take-up amongst building societies will clearly be limited. The majority of lending will be done by banks.
“Santander and Barclays are not committing themselves at this stage but I expect they will eventually.”
Mr Boulger branded it a “sensible move” to not commit yet, adding that the details of the scheme are still unknown, such as how the capital relief for lenders will work, what rates will be applied and what administration requirements will be needed. Indeed the Building Societies Association said it did not know how many of its members will be participating due to the lack of scheme details.
A Santander spokesperson said: “Santander welcomes the announcement of the second part of the government’s Help to Buy scheme. We are supportive of initiatives that help to stimulate both the housing market and the wider economy. We are continuing to look at the detail of the scheme and are considering our participation.”
Ross McEwan, RBS retail chief executive and incoming group chief executive, said: “We are committed to helping as many people as possible across Britain to get on with their lives, to buy their first home, to move to a bigger house as their family grows. That’s why RBS fully support the Help to Buy mortgage guarantee scheme and we welcome news that it will be launched soon.”