Brokers want more clarity from the Government on how the second phase of Help to Buy will operate following the news the scheme is being brought in three months earlier than planned.
The first part of Help to Buy, a shared equity scheme for new build homes, was introduced in April. The second part, a £130bn mortgage indemnity scheme for new and existing homes worth up to £600,000 was due to come into force in January.
Under the second phase, borrowers put down a deposit of between five and 15 percent, and the Government will guarantee up to 15 per cent of the purchase price in return for a fee from the lender.
The Government has now announced lenders will be able to begin writing loans through Help to Buy 2 from this week, although guarantees will not be available until January. Lloyds Banking Group and Royal Bank of Scotland have already signed up.
Lenders have to hold roughly six times more capital for loans at 90 per cent loan-to-value or over than they do on loans under 60 per cent LTV.
The Bank of England’s financial policy committee will have the power to monitor Help to Buy and, if there are signs a house price bubble is emerging, recommend changes to the scheme such as lowering the £600,000 limit or increasing the cost of the guarantee.
John Charcol senior technical manager Ray Boulger says: “This is all skin without substance, nothing much is going to happen until the lenders actually produce some products. It is odd for lenders to commit to this before fully knowing what the capital relief or the fees will be.”
London & Country associate director of communications David Hollingworth says: “Lenders can write business now, but everyone is wondering what products they will be writing that business on. We are waiting for more detail.”