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Controversial Help to Buy phase brought forward

Controversial Help to Buy phase brought forward

Category: Mortgages

Updated: 30/09/2013
First Published: 30/09/2013

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The controversial second phase of the Government's Help to Buy scheme is set to launch next week – three months earlier than originally planned.

David Cameron announced the new date at the Conservatives' annual party conference in Manchester and was quick to reject concerns that the scheme will fuel a housing bubble, arguing that the market is recovering from a "very low base" and that first-time buyers still need help to get on the property ladder.

He's also urged the to "trust" the Bank of England which has been given a stronger role in monitoring the scheme and its effect on house prices.

Help to Buy – the basics

Under the first phase of the scheme, which was launched in April this year, first-time buyers with a 5% deposit can be given a 20% equity loan from the Government, with the remaining 75% being covered by a traditional mortgage. The scheme applies to new builds only up to a maximum value of £600,000.

The second phase, now due to come into effect as of 7th October instead of the original date of January, is the "mortgage guarantee" part of the scheme – the Government will underwrite up to 15% of the value of a mortgage so homebuyers can still get a home with a 5% deposit. This phase applies to all home purchases (not just new builds) with the same cap of £600,000, and whilst applications can be made from 7th October the loans won't be paid out until 1st January.


Halifax, RBS and NatWest have already signed up to this phase whilst others, including big high street lenders like Santander, Nationwide, HSBC and Barclays, have yet to make their decision.

Critics argue that it could fuel a housing bubble with prices already rising at their fastest rate in over six years (according to property analyst Hometrack's latest survey), and there are concerns that these rises will make it even harder for first-time buyers to get on the ladder.

Adam Marshall, from the British Chambers of Commerce, added "With all the concern expressed about Help to Buy – rushing into it seems less than responsible on part of Government."

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