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The Help to Buy scheme has been a godsend for many first-time buyers, with the second phase (the Help to Buy Mortgage Guarantee scheme, otherwise known as H2B) having a profound effect on the mortgage market as a whole. It's boosted the availability of 95% loan-to-value mortgages to help a growing number of people take that first step, but with the scheme set to end this year, just what does it mean for borrowers?
In December this year, the mortgage market will wave goodbye to H2B, which means that providers will no longer be able to offer 95% loan-to-value (LTV) mortgages with the backing of a Government guarantee.
It was launched to kick-start the housing market and help first-time buyers get onto the property ladder, and it seems to have had the desired effect. It's been "a key driver in normalising the high-LTV market [and has made it] socially acceptable to lend to borrowers with a 5% deposit once again", said Charlotte Nelson, finance expert at Moneyfacts, with our figures showing just how much of a positive impact it's had (see below).
|Number of 95% LTV mortgage deals||56||182||249|
|Average two-year fixed rate at 95% LTV||5.74%||5.19%||4.33%|
|Average five-year fixed rate at 95% LTV||5.20%||5.35%||4.81%|
As you can see, H2B has transformed the 95% LTV market, with the number of available mortgages rising by a whopping 444% since October 2013. At the same time, average rates have fallen considerably, with the average two-year 95% LTV mortgage rate down by an impressive 1.41% since the scheme's launch.
"With first-time buyers often considered the lifeblood of a healthy mortgage market, it's great that there has been a significant boost in choice in this vital area," said
The scheme really has had a welcome impact on the mortgage market, but the question is, will the withdrawal of it have a detrimental effect?
Unfortunately, if H2B participants decide that they no longer want to offer 95% LTV deals when the scheme comes to an end, there's a chance that availability for this kind of deal could drop considerably in December.
However, all may not be lost. The 95% LTV market is still incredibly competitive, with the scheme having boosted lending at this level to such an extent that its withdrawal may not have too much of a negative impact: providers who aren't part of the scheme will hopefully continue to offer 95% LTV deals once the scheme has ended, and considering their rates are often more competitive, borrowers may be able to avoid any adverse effects.
Nonetheless, if you want to be absolutely certain that you won't miss out, it's important to act fast. There's no guarantee that the market will remain in such good health, so if you're thinking of buying a home in the next year, you'll want to move quickly: "First-time buyers who have not yet started the process of buying a home could find that their options narrow significantly when the scheme ends in December," cautioned Charlotte, "so to make the most of the choice available, borrowers should look to take the plunge before it becomes too late."
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