Help to Buy Guarantee Scheme (H2B2) is due to end in December -where does that leave first-time buyers and the high-LTV market?
The Government has confirmed it will end the Help to Buy scheme at the end of the year and there is concern that if the Government doesn’t continue to support the scheme it could result, in the short term at least, in disruption to the high Loan to Value/Low Deposit market.
Help to Buy Guarantee Scheme
Back in January 2014 the Government’s remedy for a sluggish high Loan to Value market was to launch the Help to Buy Guarantee scheme (H2B2). Lenders could buy a guarantee from the Government to cover any losses on 80-90 per cent Loan to Value loans, should the borrower default.
There are currently 74 H2B2 products but will the high Loan to Value market survive when the scheme is terminated at the end of the year?
It is thought that the number of products at 95 per cent LTV will dwindle further when the scheme ends which will provide a further blow to borrowers with small deposits who were getting accustomed to the plethora of choice.
In recent years, more lenders have come into that market without relying on the guarantee, including Nationwide and Yorkshire Building Society. Santander, which initially launched a 95 per cent LTV product through the scheme, recently launched a standalone 95 per cent mortgage outside it, which is an encouraging sign.
Santander has moved away from the guarantee and not changed its rates so it possible other Lenders will do the same. Although some Lenders may feel it’s much more profitable and less risky to deal with borrowers who have large deposits or levels of equity.
The Help to Buy Isa and Help to Buy equity loan schemes will continue.