New Help to Buy mortgage deals- are they hot or not?
The shiny new Help to Buy scheme is now officially open for applications, with the first providers revealing their rates under the new schemes. RBS and NatWest are offering a two-year, fixed-rate mortgage starting at 4.99% for those with a 5% deposit, with no fee, while Halifax will be taking applications in the next few days at a 5.19% rate, but with the addition of a £995 fee for those with the same 5% deposit.
Initially, it had been feared that the mortgage providers would hike rates up to cover the Government’s charge for the seven-year 15% security, which has now been announced as 0.9% of the purchase price. However, from the limited pool of 95% mortgages available outside of Help to Buy, figures from Moneyfacts suggest the cheapest national deal was 5.95% for those with a 5% deposit, or 3.54% with a £1,675 fee for those stumping up 10%. All a teeny bit higher than the 0.5% base rate though.
Figures on actual deals are not yet available from HSBC, who said it would join the scheme later in the year, and Virgin Money who will offer Help to Buy mortgages from January.
As previously described, this new Help to Buy scheme is available on new and old homes, to first time buyers and home movers and on properties worth up to £600,000. And the difference could be massive- someone buying a UK average house at £175,000 would previously have had to find £35,000 - £43,750 for a 20%-25% deposit; now they need only £8,750 up front.
But there are still critics of the scheme, who claim that it is middle class wealthy homeowners who will benefit the most and that the Government is just manufacturing new property price bubble. The Government, of course, deny this, waving the fact that the Bank of England can pull the scheme after three years if they think property prices are inflating too quickly. But how can prices not increase with even a basic knowledge of economics- unless new houses are built to increase supply, Help to Buy will increase demand, as more people are able to buy, for the same number of houses, resulting in price rises. And after three years if the Bank of England pulls the plug what will happen then? 2008 too long ago for them to remember?
So will you be availing yourself of the Help to Buy scheme? Is it a good thing or a bad thing?