The latest figures from two lenders enrolled in the Government's Help to Buy (H2B) scheme show strong uptake in the first four weeks since the mortgage guarantee element was launched, but that hasn't made consumers any less confused about the process. Last week Sylvia Waycot, editor of Moneyfacts.co.uk, appeared on BBC Breakfast to discuss Help to Buy and the confusion surrounding it.
Royal Bank of Scotland (RBS) and Halifax have received a total of 2,384 applications under the scheme, potentially amounting to £365 million in mortgages, with the majority coming from first-time buyers. RBS said it's so far approved 169 of 1,075 applications with 5 customers having already completed their purchases, with most applicants being young couples who have a modest joint salary of less than £50,000. Halifax has continued the trend, with 80% of their Help to Buy applicants being first-time buyers. The Government is encouraged by the latest figures and says the scheme is supporting "responsible lending", with David Cameron adding: "Four weeks in and it's clear that Help to Buy is already delivering. Most Help to Buy applicants are first-time buyers, young and have a roughly average household income. This is all about helping hardworking people get on the first rung of the property ladder."
However, not everyone welcomes the figures. Critics are concerned that the scheme could fuel a housing bubble with rapidly rising prices making affordability even more of a problem, suggesting that focusing on house building would offer more help to first-time buyers so supply can meet demand. Meanwhile, consumers themselves are left confused by the whole process. As Moneyfacts reported last week a lot of potential homebuyers are unaware of the potential benefits while a large proportion actively overestimate the benefits they could enjoy, and many simply don't know the difference between a standard 95% mortgage and one offered under Help to Buy.
One of the biggest misconceptions is that a mortgage will be easier to secure under H2B, when in fact the same lending rules apply. Guaranteed acceptance isn't part of the scheme and in some cases the criteria will be even stricter, particularly considering the Government's focus on responsible lending, with certain categories of people (such as the self-employed) still likely to face difficulties.
Another key area of confusion is that consumers aren't aware that not all banks and building societies are signed up to the scheme, whilst many more don't know that there are alternatives. So far only a few lenders are actively participating in Help to Buy but that doesn't mean they're the only option for those seeking a 95% LTV mortgage – a lot of other lenders are getting into the 95% market and are offering highly competitive products, with a lot of building societies (for example) offering rates and deals that are as good, if not better, as those offered under H2B.
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