Mortgages  

Help to Buy under fire for swelling gov’t coffers

The director of London-based advisory firm Whitehead Associates said the upfront charge levied by the Treasury would make loans twice as expensive.

The fee of between 0.3 per cent to 0.9 per cent, depending on the loan-to-value, is imposed on the whole value of loans, not just the insured portion.

Ms Whitehead estimated that the scheme could bring in hundreds of millions of pounds in revenue for the Treasury. She said this showed that the government’s intentions were “far from altruistic”.

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RBS, NatWest and Halifax started taking applications this week, and other lenders including HSBC and Virgin Money announced that they will join later this year.

Andrew Tyrie MP, chairman of the Treasury select committee, said the scheme was likely to “raise house prices rather than stimulate new supply”.

He added that the “chequered history” of government interventions in residential property could distort the housing market or carry threats to financial stability.

The Council of Mortgage Lenders welcomed the scheme’s launch but warned that an increase in homebuilding was crucial for its success.

Paul Smee, director general of the CML, said: “The homes need to be there for people to buy, as well as the finance to buy them.”

Help to Buy rules

The Treasury out lined the rules for Help to Buy in a 66-page document released on 8 October. The key points included:

* Borrowers are only eligible for the scheme if they take out a repayment mortgage loan, and only if the mortgage is a ‘first-ranking’ loan. Interest-only loans are not eligible.

* The loan will only be granted if the borrower can prove he is not credit-impaired and have fulfilled affordability tests, with a maximum loan amount of £600,000 underwritten by the government.

Adviser View

David Hollingworth, head of communications for Somerset-based London and Country Mortgages, said: “We have experienced interest in the scheme and I expect that to increase as we see more products on the market. However I think its harsh to criticise the Treasury charges. This type of scheme from the private sector would be much more expensive.”