Homebuyers are increasingly taking full advantage of the Help to Buy mortgage guarantee scheme to secure loans of up to 95 per cent to buy a home, a major broker says.
According to new data from Mortgage Advice Bureau, the average loan-to-value (LTV) ratio of mortgages on the scheme rose to 94.4 per cent in June, just shy of the maximum 95 per cent available.
That indicates buyers are putting up smaller deposits, averaging just £8,527 in June compared with £11,438 in April – a saving of £2,911 or 25 per cent.
However, the average price of properties bought via the scheme has remained stable in this period with June’s figure of £151,285 just 0.2 per cent higher than April’s £151,021.
Borrowers using the scheme are subject to stringent checks and new loans are capped at 4.5 times the borrower’s income.
The data suggests the scheme is proving increasingly valuable to aspiring buyers as rising house prices and tighter criteria are having a visible impact on deposit sizes.
Mortgage Advice Bureau’s head of lending Brian Murphy says while the volume of buyers using HTB2 is small the scheme plays an important role.
“Buying with a 5 per cent deposit remains the only realistic option for many would-be first time buyers – especially those who cannot rely on parental hand-outs.
“With the right checks and balances in place, this kind of activity is an important part of a healthy mortgage market that can satisfy consumer needs without compromising on standards.”
