Lenders have begun to roll out mortgages under the second phase of the Government’s £12bn Help to Buy scheme, with 95 per cent deals starting at 4.99 per cent.
Help to Buy 2 will see the Government guarantee up to 15 per cent of the property’s value on new and existing homes worth up to £600,000 in return for a fee from the lender.
RBS and NatWest have launched a two-year fix at 95 per cent loan-to-value at 4.99 per cent, and a five-year deal at the same LTV at 5.49 per cent. Neither product carries an arrangement fee. Brokers will not be able to access the range until later this year.
Both lenders also offer five-year fixed rate products at 5.49 per cent and none of these products has a fee.
Halifax has launched a two-year fix 95 per cent LTV at 5.19 per cent with a £995 fee which will be available through branches and brokers from 11 October.
Virgin Money, HSBC and Aldermore will join the scheme next year.
Lenders can originate Help to Buy loans under three categories: remortgage, purchase and internal finance. Loans will then fall under three LTV tiers which will determine the fee lenders pay to access the Government guarantee. The fees are 0.9 per cent for loans between 90 and 95 per cent LTV, 0.46 per cent for loans between 85 and 90 per cent, and 0.28 per cent for loans between 80 and 85 per cent.
All eligible loans have to be included, and lenders cannot opt to put better quality loans outside the scheme.
Higher LTV loans usually require banks to hold more capital, but lenders will be able to obtain capital relief under Help to Buy 2. The relief will depend on the template lenders use to calculate their capital.
Trinity Financial product and communications manager Aaron Strutt says: “Other lenders will enter the Help to Buy fray in the coming weeks.
“In parts of London we know there has been a bubble for years, but in the rest of the country it is a different story. If this helps people onto or up the property ladder this kind of initiative will be welcome.”