The Bank of England base rate has again been held at 0.5%, as the focus shifts in the Treasury from interest rates towards stimulating the UK housing market via the second part of the Help to Buy scheme.
The scheme, as announced by David Cameron last week, allows lenders access to a government guarantee of up to 15% of the value of the property, thereby enabling them to lend to buyers to purchase with a 5% deposit, where lenders would typically require a minimum of 10%.
Phase 2 of the controversial Help to Buy scheme was being mooted as a premature measure by the likes of Business Secretary Vince Cable as recently as last month, given that UK house prices were showing signs of growth without any Government interference. David Cameron then announced that he was bringing the date forward from January 2014 to October 2013, demonstrating signs of disunity in the coalition government.
"As Prime Minister I am not going to stand by while people's aspirations to get on the housing ladder are being trashed."
Cameron went on to say "If we don't do this it will only be people with rich parents to help them who can get on the housing ladder - that is not fair, it is not right."
At this early stage, only three lenders have committed to the scheme, with Nationwide, HSBC, Barclays and others expected to follow in their footsteps once further details are released by the government.
Halifax, Royal Bank of Scotland and NatWest all released news of their first expected product offerings this week, with a selection of 2 and 5 year fixed rates on offer.
Halifax, the largest ‘contractor-friendly’ lender in the UK, are expected to offer a 2 year fixed rate at 5.19%, with a £995 arrangement fee; with RBS/NatWest competing with a 4.99% product, fixed for two years, that is expected to carry no fee.
RBS/NatWest are also expected to announce a longer term 5 year option, fixed at 5.49%, which is again expected to be available with no arrangement fee.
“These products will make mortgages more accessible – providing a genuine solution for those who have not been able to get on, or move up, the ladder” said Stephen Noakes, Mortgage Director at Halifax.
Applications to Halifax are expected to be made available from tomorrow, with RBS/NatWest already offering their products directly to potential borrowers.
Taj Kang, Business Development Director at Contractor Mortgages Made Easy, greeted the news with optimism.
“Although Mr Cable makes a valid point around further housing market stimulus potentially creating a housing bubble, the Prime Minister also makes a valid point about helping people here and now.”
“It is a little unfair on those Contractors looking to get on, or indeed move up the housing ladder to put down a 10% plus deposit, where wealthy investors can come in and buy property to take advantage of rising house prices. This problem is particularly prevalent in and around the capital.”
“The new stage of the Help to Buy scheme ensures the contractor is a proper homeowner, and can work hard to reduce the mortgage over the next two to five years, and can then refinance onto a lower rate if appropriate. Over those two to five years, the property price will hopefully increase as well. If the Contractor has to wait another year to save up 10%, in real terms the figure required for a deposit will be higher if property prices are increasing.”
Article By: Mark McBurney, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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