Help to BuyJan 30 2018

Skipton unveils Help to Buy exit loans

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Skipton unveils Help to Buy exit loans

The society’s new range, which comprises two, three and five-year fixed rate remortgage products, offers £1,000 cashback to help Help to Buy customers with the increased legal and administrative costs typically incurred when repaying the government equity loan. 

The products, which are all fee free and include free upfront valuations, include two-year fixes at 2.75 per cent to 90 per cent LTV and 2.49 per cent to 85 per cent LTV, three-year fixes at 2.85 per cent to 90 per cent LTV and 2.54 per cent to 85 per cent LTV, and five-year fixes at 2.99 per cent to 90 per cent LTV and 2.64 per cent to 85 per cent LTV.

According to Skipton bosses, the products could be considered to help borrowers ‘staircase out’ of Help to Buy by increasing their borrowing to repay the equity loan – before interest payments begin to be charged.

As Help to Buy: Shared Equity customers approach the fifth anniversary of the scheme and interest payments on the equity loan begin to kick in, Skipton bosses said many homeowners will consider paying off their equity loan and taking the opportunity to increase their mortgage borrowing to buy their home outright.

The first phase of the Help to Buy: Shared Equity scheme in England began in April 2013 with the government offering a 20 per cent equity loan deposit contribution to buyers of newly-built properties who were able to provide their own 5 per cent deposit.  

Under the scheme rules, the equity loan due to be repaid increases or decreases in line with house price movement, a factor many Help to Buy customers may well be considering following average house price growth of 25.5 per cent since the inception of the scheme.  

While all equity loans have remained interest-free for the first five years, the approaching fifth anniversary of the scheme will see an interest fee of 1.75 per cent of the amount of the equity loan charged monthly, rising annually by any increase in the Retail Price Index plus 1 per cent.

Jonathan Harris, director of mortgage broker Anderson Harris, said: "There are still not many lenders who will look at Help to Buy, especially for those remortgaging, so there is a massive gap in the market for this type of product.

"With the anniversary of the launch of the scheme approaching, it is good to see a lender taking steps to help those borrowers who need to consider their options now that it is time to start paying interest on the equity loan. 

"Skipton already allowed people with a Help to Buy equity loan to remortgage so it is nothing new for this lender but as it is now also offering £1,000 cashback, it should pick up a good share of this market. 

"There are lots of additional costs to consider, such as two valuations needing to be carried out and the additional legal costs so that cashback will help. 

"However, it is a shame that when exiting the scheme, the rates available are not in line with the rest of the market but are slightly higher than standard mainstream deals at these loan-to-values."

Ray Boulger, senior technical manager of John Charcol, said remortgagers expect a free valuation these days but the £1,000 cashback in lieu of free legal fees should allow borrowers to choose their own solicitor and have some change left over out of legal costs, and at the same avoid the nightmare of delays often seen with free legal fees deals.

He said: "The smaller the mortgage the greater the effective value of the £1,000 cash back and no arrangement fee and so although there are cheaper rates on the market for smaller mortgages Skipton's rates are good value.

"However, for larger mortgages, lower rates available elsewhere offer better value.

"Borrowers with a Help to Buy second charge equity share mortgage coming to the end of their initial rate should consider their options carefully."

emma.hughes@ft.com