Lenders pledge support for Help to Buy scheme


The second part of the government’s Help to Buy scheme, originally due to take effect in January 2014, has now launched.  It will offer buyers the support of a taxpayer-backed mortgage indemnity scheme for any house (new or old) up to the value of £600,000. The Treasury believe that this second phase of the scheme will generate around 190,000 sales per year, equivalent to one fifth of annual UK housing transactions.

RBS, NatWest and Halifax have already started taking mortgage applications, with HSBC, Virgin Money, Lloyds, TSB and Aldermore promising to join later. Altogether, some 40% of the UK’s mortgage providers have committed to the scheme. However, the loans themselves will not be available to borrowers until January, meaning that house sales may be agreed and go to exchange, but not completed before then.

The Help to Buy scheme has caused some controversy with critics claiming it will cause a housing bubble. Certainly, Nationwide announced that UK house prices have already gone up 5% in the last year, whilst Rightmove raised its forecast for house price inflation to 6% for this year. Chancellor George Osborne has now sought to address these concerns by inviting the Bank of England to review the scheme each September and introduce controls if necessary. Such controls could include making insurance more expensive for lenders (leading to mortgage rate increases) or, perhaps, reducing the £600,000 threshold.

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