Moneyfacts, the independent financial products monitoring service, says first time buyer have a lot to thank Help To Buy for – even if they did not use it as a means to obtain a mortgage on a property to purchase.
Back in September the government confirmed that the Help To Buy Guarantee scheme – introduced in 2013 to increase the availability of high loan-to-value mortgages, typically likely to assist those with little by way of a deposit – would close at the end of December.
When confirming the closure the government claimed that “confidence has now returned to the market with an increasing number of lenders offering 90 to 95 per cent loans outside the scheme.” It seems Moneyfacts agrees with the government.
Analysis by the service shows that in October 2013 there were 56 mortgage products based on 95 per cent loan to value; that figure rose to 179 by the end of 2014 and 246 by the end of last year. It now stands at 269.
Likewise the five year average fixed interest rate on a 95 per cent LTV mortgage back in October 2013 was 5.5 per cent – now it’s 4.48 per cent.
“First-time buyers, regardless of if they used the scheme or not, have a lot to thank it for, as prior to the scheme borrowers would have struggled to find a deal that was not locals-only or did not require a parent or guardian to guarantee the loan” says Moneyfacts spokeswoman Charlotte Nelson.
“Even if they did manage to find a suitable deal, the cost of the repayments would have been high. However, since the introduction of the scheme, the number of products has increased by 380 per cent and the average two-year fixed rate has fallen below four per cent for the first time on record” she adds.
However, Moneyfacts accepts that it was often the case that the Help to Buy deals on offer were more expensive than the standard deals available. For example, today the best overall five-year fixed rate stands at 3.97 per cent, whereas a similar Help to Buy product is 0.31 per cent more.
“Only time will tell what the true effect of the removal of such a pivotal scheme will be. However, the growth we have seen in the past is starting to slow, perhaps showing signs of what is to come for first time buyers” says Nelson.