Home Buying Features

Help to Buy or not Help to Buy?

mortgage rate

mortgage rate

Almost a year on from the launch of the first phase of Help to Buy, Laura Edgecumbe-Ansdell reviews where we are now – and whether Help to Buy mortgages are still the best value on the market >>


The government scheme Help to Buy 1 launched in England in April 2013 and offered equity loans to buyers with only a 5% deposit to buy a new build property worth up to £600,000. Similar schemes are now available in Scotland for properties up to a value of £400,000; and Wales, for properties up to a value of £300,000.

The second phase of the Help to Buy scheme – the Mortgage Guarantee Scheme known as Help to Buy 2 – launched in October 2013 and is available for properties with a maximum value of £600,000. Unlike the equity loan scheme, it applies to all property purchases, not just new build homes. The government guarantees up to 15% of the home loan as an insurance policy for the banks, with buyers only having to provide a 5% share of the deposit for an 80% LTV. The Mortgage Guarantee Scheme is available throughout the UK.

So far, Help to Buy has been a huge success story. First time buyers wasted no time in utilising the high LTV mortgages available under the scheme. According to Department for Communities and Local Government (DCLG) figures the first six months of the first phase of the Help to Buy saw the purchase of 5,375 new homes under the scheme. And many house builders have said their businesses have been boosted by Help to Buy. DCLG figures show that in the first seven months of Help to Buy 18,050 reservations were made for new build homes. The Markit survey of the construction industry found in November 2013 that developers were building homes at the fastest pace for 10 years. This is more good news as supply of new homes is key to making more affordable properties available for ftbs.

» Royal Bank of Scotland and NatWest both offer a two-year fixed rate at 4.99% with just 5% deposit and a five-year fixed rate at 5.49%. Neither incurs a product fee.

» The Bank of Scotland offers through Halifax a 5.19% two-year fixed rate deal for a £995 fee.

» Santander provides a two-year fixed rate at 4.99%, a five-year fixed rate at 5.49% and a two-year variable rate tracker at 4.99%. There are no upfront booking fees and borrowers will receive a free valuation and £250 cash-back on completion.

» HSBC deals include a two-year fixed rate at 4.79% with a £99 fee and a five-year fixed rate of 4.99% also with a £99 fee.

» Virgin offers a two-year fixed rate at 5.29%; a three-year fixed rate costs 5.39%. Virgin also offers a five-year fixed rate at a rate of 5.49%. It charges no fees and some deals include a £300 cashback.

» Aldermore provides a two-year fixed rate at 5.28% with a £999 fee. Although this is relatively pricey, unlike high-street lenders where criteria are more restrictive and applications are subject to credit scoring, Aldermore assesses each application on an individual basis. It does not use restrictive credit scoring; it uses individual case underwriting and provides competitive interest rates.

» Lloyds Bank offers a product with a two-year fixed rate of 5.19% with a £995 fee for homebuyers with a Lloyds Bank current account.

» Other providers that offer Help to Buy deals include Nationwide (nationwide.co.uk) and The Post Office (postoffice.co.uk/mortgages) with its financial services partner, Bank of Ireland UK and Barclays (barclays.co.uk).

» Teachers Building Society provides a 2.89% three-year discounted variable rate mortgage, but this is only available to those in the teaching profession.

» In Northern Ireland, Help to Buy mortgages are now available. For information, visit the Bank of Ireland site at boini.bankofireland.com and Ulster Bank at ulsterbank.co.uk

The launch of the Help to Buy scheme has had a knock-on effect – a significant increase in high LTV mortgages across the market – even where the lenders are not taking advantage of government backing under Help to Buy.

For example, in November 2013, Yorkshire Building Society launched 36 mortgages aimed at buyers with a 5% deposit – the largest range of 95% mortgages available from any lender at interest rates that better those offered under Help to Buy. The cheapest deal from its Chelsea Building Society arm offers a two-year fixed rate of 4.59%, compared with 4.99% for the cheapest rate under an equivalent government-backed deal. However, this offer does come with a hefty fee of £1,545.


Provider  Rate Type Rate (%) Term (Years) Max LTV (%) Arrangement Fee Booking Fee
HSBC Fixed 4.79 2 95 N/A £99
HSBC Fixed 4.99 5 95 N/A £99
NatWest Fixed 4.99 2 95 N/A N/A
RBS Fixed 4.99 2 95 N/A N/A
Halifax Fixed 5.19 2 95 £995 N/A
Virgin Money Fixed 5.29 2 95 N/A N/A
Virgin Money Fixed 5.39 3 95 N/A N/A
Virgin Money Fixed 5.49 5 95 N/A N/A


Provider  Rate Type Rate (%) Term (Years) Max LTV (%) Arrangement Fee Booking Fee
Monmouthshire BS Discount 3.75 3 95 N/A N/A
Loughborough BS Discount 4.49 5 95 N/A N/A
Melton Mobray BS Discount 4.49 3 95 £399 £199
Chelsea BS Fixed 4.59 2 95 £1,545 N/A
Monmouthshire BS Fixed 4.65 3 95 £499 N/A


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