This is a guest post.
Help to Buy, a government program that launched this year, is aimed at trying to make cheap mortgages readily available to homeowners on average incomes. It was founded to give house-hunters a chance to take out 95% mortgages, partially funded by the government. Some banks have sided with the coalition, but not everyone is on board.
At first glance, it seems that Help to Buy offers many first-time buyers a good deal. Buyers can pay just 5% of the home?s value as a deposit, while a further 20% of the mortgage is interest-free for the first five years. However, some banks are preparing alternatives to Help to Buy in the hope that they can get potential homeowners to come to them directly.
Fixed Rate Frenzy
A handful of banks are offering new 95% value mortgages, a product that had been a rare find a few years ago. Some of these mortgages come with fixed rate periods ranging from one year to three years, but what of the rates on offer? Two banks have fixed rates of 4.99% for a 5% deposit with no fees involved, while some are offering lower rates.
Just a few lenders are offering sub-5% rates for a small fee, but there are provisos such as the provider only operating in a local area. Some might wonder whether these low rates will last and if more alternatives to Help to Buy are likely to spring up for as long as the scheme is running. Regardless, the clamour to assist first-time buyers is growing at a rapid pace.
Worth the Wait?
With property prices sky-high in some of the more affluent parts of the UK, any help from government or lenders may be welcomed by hard-pressed house-hunters. However, questions over whether or not Help to Buy offers genuine value after the first few years may undermine the scheme?s success, leaving a void for banks and building societies to fill.
Chief Executive Chris Pilling from Yorkshire Building Society spoke positively of the bank?s own rates.
?Our fundamental aims as a building society ? helping people to save for the future and buy their own home ? are unwavering and being so closely rooted in our communities makes us ideally placed to achieve them.?
Some banks have chosen to participate in the Help to Buy scheme. Some of the explanations offered by them included having the ability to offer first-time buyers cheaper-than-average mortgages and meeting growing demand from those frustrated by their failed attempts to get onto the property ladder. Time will tell whether those working for or against the scheme will offer the best value.