The government's Help to Buy scheme has coincided with a near four-fold increase in the number of 95 percent loan to value product (LTV), research from Moneyfacts.co.uk shows.
The mortgage guarantee scheme for first time buyers, which expires on 31 December, works in exactly the same way as any other mortgage except that under the scheme the government offers lenders the option to purchase a guarantee on mortgage loans.
Because of this support, lenders taking part are able to offer first time home buyers more high loan-to-value mortgages (80-95%), meaning they needed to save up a smaller deposit.
In October 2013, when the scheme was launched, there were only 56 products on the market offering LTVs at 95 percent, but today that figure has risen to 269.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, heralded the success of the scheme, but was cautious of the future for first time buyers.
“Only time will tell what the true effect of the removal of such a pivotal scheme will be. The growth we have seen in the past is starting to slow, perhaps showing signs of what is to come for first-time buyers.”
The research by Moneyfacts.co.uk shows the two year average fixed rate for a 95 percent LTV has fallen from 5.74 percent to 3.91 percent since the scheme was launched and the five year average fixed rate has fallen from 5.5 percent to 4.48 percent.
Nelson noted that for Help to Buy specific deals rates were often higher than the norm, pointing out that today the best overall five-year fixed rate is 0.31 percent cheaper than a similar Help to Buy product.
Simon Webster, managing director at Facts and Figures Financial Planners, observed the demise of the Help to Buy scheme.
"Its been very helpful to those who have been able to use it and there are a number of first time buyers who will mourn its passing, but you could also argue that it has been a stimulus to the housing market and the last thing you need is more stimulus," he said.
"It was an emergency measure at a time when the market was in the doldrums, its done its job and while some will mourn its demise its probably about time it was retired."
