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| First Help to Buy mortgage rates disappoint housebuyers | First Help to Buy mortgage rates disappoint housebuyers |
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| Homebuyers hoping that the government's £12bn Help to Buy mortgage scheme would make buying a property more affordable were disappointed on Tuesday as experts branded the first deals available as little better than offers already on the market. | Homebuyers hoping that the government's £12bn Help to Buy mortgage scheme would make buying a property more affordable were disappointed on Tuesday as experts branded the first deals available as little better than offers already on the market. |
| On the first official day of the scheme, which offers lenders a taxpayer-backed guarantee for loans to borrowers with as little as 5% deposits, three high street banks were signed up. But personal finance advisers suggested borrowers should sit tight and wait until more lenders entered the market, or save a bigger deposit that would allow them to access better rates. | On the first official day of the scheme, which offers lenders a taxpayer-backed guarantee for loans to borrowers with as little as 5% deposits, three high street banks were signed up. But personal finance advisers suggested borrowers should sit tight and wait until more lenders entered the market, or save a bigger deposit that would allow them to access better rates. |
| Only RBS has put Help to Buy mortgages on sale. It said it had contacted 500 would-be borrowers who had registered their interest in the scheme. It is offering two deals: one with a rate of 4.99% for two years and a second with a 5.49% interest rate fixed for five years. | Only RBS has put Help to Buy mortgages on sale. It said it had contacted 500 would-be borrowers who had registered their interest in the scheme. It is offering two deals: one with a rate of 4.99% for two years and a second with a 5.49% interest rate fixed for five years. |
| The UK's largest lender, Halifax, said it would be offering 95% mortgages from Friday and that its range would include a two-year fixed-rate deal priced at 5.19% with a £995 fee. | The UK's largest lender, Halifax, said it would be offering 95% mortgages from Friday and that its range would include a two-year fixed-rate deal priced at 5.19% with a £995 fee. |
| But the mortgages appeared to be virtually in line with offers already on the market. Before the launch of Help to Buy, which is available on properties costing up to £600,000, lenders were offering rates of around 5.5% on first-time buyer 95% deals, and many buyers had anticipated rates falling well below 5%. | But the mortgages appeared to be virtually in line with offers already on the market. Before the launch of Help to Buy, which is available on properties costing up to £600,000, lenders were offering rates of around 5.5% on first-time buyer 95% deals, and many buyers had anticipated rates falling well below 5%. |
| Louise Doherty, a prospective first-time buyer who before the launch said she had high hopes for Help to Buy, said she was "a bit underwhelmed" by what was on offer. | Louise Doherty, a prospective first-time buyer who before the launch said she had high hopes for Help to Buy, said she was "a bit underwhelmed" by what was on offer. |
| "They don't appear to be much more competitive than the existing 95% mortgages, which do exist even if there's not that many," she said. "We'll probably wait until more banks announce their rates, when hopefully a little competition will bring them down below the 4.5% we were expecting. Hopefully by that time more houses will be on the market in our price range too." | "They don't appear to be much more competitive than the existing 95% mortgages, which do exist even if there's not that many," she said. "We'll probably wait until more banks announce their rates, when hopefully a little competition will bring them down below the 4.5% we were expecting. Hopefully by that time more houses will be on the market in our price range too." |
| Martin Lewis, founder of the MoneySavingExpert website, said he expected the second part of Help to Buy to increase competition, lower rates slightly and bring many more buyers into the market. | Martin Lewis, founder of the MoneySavingExpert website, said he expected the second part of Help to Buy to increase competition, lower rates slightly and bring many more buyers into the market. |
| But he added: "While these deals are cheaper than existing 95% mortgages, they're still very costly compared to normal mortgage rates. To those going for this scheme, do consider if you could push to a 10% deposit – doing that would hugely slice your monthly repayments." | But he added: "While these deals are cheaper than existing 95% mortgages, they're still very costly compared to normal mortgage rates. To those going for this scheme, do consider if you could push to a 10% deposit – doing that would hugely slice your monthly repayments." |
| Of the other big mortgage lenders, only HSBC has declared its intention to sign up to the scheme, announcing it will offer 95% loans before the end of the year. It would not disclose how much it intended to charge, but has been very active in the 90% mortgage market and has been offering to beat or match high street competitors' prices. | Of the other big mortgage lenders, only HSBC has declared its intention to sign up to the scheme, announcing it will offer 95% loans before the end of the year. It would not disclose how much it intended to charge, but has been very active in the 90% mortgage market and has been offering to beat or match high street competitors' prices. |
| Jonathan Harris, director of the mortgage broker Anderson Harris, was more positive and said the rates on offer were "where we would expect them to be … Historically, anything around 5% for a five-year fix is an excellent rate so to pay not much more than that to borrow 95% LTV (loan to value) is competitive." | Jonathan Harris, director of the mortgage broker Anderson Harris, was more positive and said the rates on offer were "where we would expect them to be … Historically, anything around 5% for a five-year fix is an excellent rate so to pay not much more than that to borrow 95% LTV (loan to value) is competitive." |
| Harris said he would expect rates to edge down as more lenders entered the market, but he added: "It is a fact of life that borrowers will always pay a premium for a high LTV." | Harris said he would expect rates to edge down as more lenders entered the market, but he added: "It is a fact of life that borrowers will always pay a premium for a high LTV." |
| Ian Gordon, banks analyst at Investec, said banks would be able to generate "very satisfactory returns" from the scheme. "Banks will do some business and they will make money out of it and the risks are borne by you and me," he said. "There seems to be slight disappointment that [rates] are not cheaper but I wonder if that is a realistic disappointment. Banks were always going to use the argument that they were lending to the riskier category." | Ian Gordon, banks analyst at Investec, said banks would be able to generate "very satisfactory returns" from the scheme. "Banks will do some business and they will make money out of it and the risks are borne by you and me," he said. "There seems to be slight disappointment that [rates] are not cheaper but I wonder if that is a realistic disappointment. Banks were always going to use the argument that they were lending to the riskier category." |
| Government officials stressed that Help to Buy was not being introduced to cut interest rates for borrowers, but to make 95% loans more widely available to creditworthy borrowers, and some lenders were introducing 95% deals for the first time since the credit crunch. | Government officials stressed that Help to Buy was not being introduced to cut interest rates for borrowers, but to make 95% loans more widely available to creditworthy borrowers, and some lenders were introducing 95% deals for the first time since the credit crunch. |
| Before the launch of Help to Buy, RBS offered a maximum 90% deal, but now it will lend between £1bn and £1.5bn to buyers with just a 5% deposit. Lloyd Cochrane, head of mortgages at RBS and NatWest, said pent-up demand was high. "Over the next three years we expect to issue mortgages at 95% to 25,000 customers. Around 750 of our branches will be opening late to cope with demand, and we are already contacting 500 people who applied when the news of our loans first broke at the weekend." | Before the launch of Help to Buy, RBS offered a maximum 90% deal, but now it will lend between £1bn and £1.5bn to buyers with just a 5% deposit. Lloyd Cochrane, head of mortgages at RBS and NatWest, said pent-up demand was high. "Over the next three years we expect to issue mortgages at 95% to 25,000 customers. Around 750 of our branches will be opening late to cope with demand, and we are already contacting 500 people who applied when the news of our loans first broke at the weekend." |
| Figures from the Royal Institution of Chartered Surveyors suggested that even before the launch of the second phase Help to Buy was fuelling interest from homebuyers, with its members reporting a fifth consecutive month of rising prices. | Figures from the Royal Institution of Chartered Surveyors suggested that even before the launch of the second phase Help to Buy was fuelling interest from homebuyers, with its members reporting a fifth consecutive month of rising prices. |
| The Treasury minister Danny Alexander dismissed fears of a housing bubble, telling Sky News that those criticising the scheme "need to get out more" to areas of the country where house prices were not rising quickly. | The Treasury minister Danny Alexander dismissed fears of a housing bubble, telling Sky News that those criticising the scheme "need to get out more" to areas of the country where house prices were not rising quickly. |
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