A rush of activity is expected in the housing market from today as high Street banks, including Natwest, RBS, Halifax and Bank of Scotland will start offering loans under the Help to Buy mortgage guarantee scheme.
Virgin Money has also confirmed they will participate in the scheme, and will be offering new guaranteed mortgages to borrowers in the New Year. Aldermore Bank has confirmed that it is joining the scheme in January, and is exploring whether this date can be brought forward.
Natwest and RBS customers will be able to start the process of applying for a mortgage from now, with other banks to follow in the next few days.
The purpose of the Help to Buy scheme is to allow those who can afford to make mortgage repayments but cannot raise the sum needed for a substantial deposit to take out a loan to purchase a home.
It is made up of two parts; the first is the equity loan element, which was introduced in April and allows those who meet the criteria to borrow 20 per cent of the cost of a new build home from the government.
Help to Buy 2 is available for all homes on the market up to a value of £600,000 and, with a 5 per cent deposit put down, the government will guarantee a further 15 per cent of the loan, making it more attractive for lenders to offer mortgages as they will be compensated if a borrower defaults within the first seven years.
On the launch of the scheme the Prime Minister said: “Too many hardworking people are finding it impossible to buy their own home – people who can afford the monthly mortgage payments but haven’t got rich parents and can’t pay the deposit up front.
“There is a need for Government to act. Buying your first home is about far more than four walls to sleep at night. It’s somewhere to put down roots and raise a family. It’s an investment for the future. Above all, it’s a sign that everything you’ve put in has been worth it.
“Our Help to Buy Equity Loans, have already helped over 15000 people buy a new home. But we’ve got to go further and finish the job we’ve started.
“So from today, thousands of people will be able to get a foot on the housing ladder by applying for the new Help to Buy mortgage guarantee. If you’ve got 5 per cent of the funds for a mortgage deposit, we’re providing a guarantee to the banks to help you get the rest.
“Help to Buy is going to make the dream of home ownership a reality for many who would otherwise have been shut out. This goes right to the heart of my vision for Britain – a country where everyone who works hard can get on in life.
“Moves such as Help to Buy will also encourage housebuilding. If potential buyers can’t buy, builders won’t build – so this is an important part of unlocking the market.”
The Chancellor of the Exchequer, George Osborne said: “Through Help to Buy: mortgage guarantee I want to help those families that have saved for years, earn decent salaries, but cannot afford the deposits currently being asked for by the banks. I want young people to have the same chance of getting on the property ladder as their parents and grandparents.
“Too many people are still being denied the dream of owning their own home, which is why we have brought forward the launch of this scheme, so as of today borrowers can start applying for a mortgage with a five per cent deposit.”
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