Life outside the Help to Buy Scheme!

Posted on: 22 October 2013 by 50connect editorial

Ronan Marrion says a housing bubble is just one of the downsides of the Government's 'Help to Buy' scheme.

Help to Buy schemeIf you are looking to sell or move your home you will be more than aware of the recent activity and press speculation surrounding the Help to Buy scheme phase two. If you are about to approach a lender for a mortgage you should be aware that there is ‘life outside’ the Help to Buy scheme and any independent mortgage broker will be able to show you alternative schemes that could be as enticing and possibly have better terms.

We have a cautious view of how it will affect the housing market and who it will help. There is no doubt that it will help people get onto the housing ladder and in turn this will free up the market for existing home owners to sell their own properties but there is also potential downsides.

On the one hand you have many leading specialists such as António Horta-Osório, the executive of part state-owned Lloyds Banking Group, who has highlighted the potential issues with limited housing supply and said that unless the Government frees up planning restrictions to boost the supply of new housing the "Help to Buy" mortgage scheme risks creating a property bubble. (3)

"It is important that planning permits, building authorisations and social housing projects are (liberalised) so that the increase in (mortgage) transactions does not lead to a substantial increase in house prices," he said. (3)

Just last month we have seen the Nationwide Building Society saying house prices were rising across every region of the UK for the first time since the credit crisis erupted in 2007. (3) Royal Bank of Scotland (RBS) yesterday said that it had booked up 5,000 mortgage appointments with customers within just three hours of the scheme going live last week and in all the bank took 10,000 calls in the first four working days of the scheme, double the amount it would typically expect to receive. (2)

RBS, more than 80 per cent owned by the taxpayer, said that so far, the typical Help to Buy applicant was 32 years-old and looking for a joint mortgage for a property. The youngest applicant to date is 19, and the oldest, 42. (2)

The market has started responding to the schemes launch and both Clydesdale Bank and Yorkshire Bank have cut the rates on their mortgages for those with a five per cent deposit, beating deals offered through the Help to Buy scheme. The banks reduced the rates on their three year fixed rate mortgages, from 5.49pc to 4.99pc, for those with a 5pc deposit. (1)

RBS-NatWest, which is majority owned by the Government, was the first to reveal the pricing of its Help to Buy mortgages on Tuesday, offering a two-year fixed rate deal at 4.99pc with no fees.

The rate offered by Clydesdale and Yorkshire banks matches NatWest's but they improve on it by fixing the cost for three years rather than two. There are also no fees and borrowers will get a free standard valuation and £250 cash back on completion. (1)

Prime Minister David Cameron has defended the scheme for giving the right to buy to young Britons whose parents cannot afford to hand them a deposit. Critics say it not only exposes the taxpayers to property market losses - the Government will offer up guarantees of £12bn on up to 15pc of each mortgage - but that it could also create another dangerous bubble in house prices. (1)

With the rate offered by Clydesdale and Yorkshire banks beating those under Help to Buy, it raises the question as to whether the Government scheme is necessary and mortgage specialists are saying that borrowers won't care that these mortgages aren't backed by the Help to Buy scheme, they'll look at the rate alone and know that Clydesdale and Yorkshire are offering a better deal and this is indicative of an increasingly more competitive market

Ronan Marrion of Worldwide Financial Planning said;

These deals are outside of the Government’s Help to Buy scheme and really lays down the gauntlet to the entire mortgage market. Not only do the schemes exceed the best offer from banks that are partaking in the Help to Buy scheme but it is the lowest rate for a totally unrestricted mortgage deal. Anything lower requires either some form of guarantor or that you belong to a specific regional area.”

Other experts in the market also stress that people should still consider if you could push to a 10pc deposit then you would hugely slice your monthly repayments and open up a wider choice of lenders and schemes. (1)

There are also question marks for the people who have invested in property to rent out with estate agents Chesterton Humberts predicted in a report on Sunday that rents in the UK could fall by 5pc over the next three years because of sheer number of people who may now look to buy a home. (3)

All in all there are a lot of questions that are being raised in what could be a very important financial decision for the individuals involved. There could be alternative schemes for home buyers that offer equivalent if not better terms and if you have invested in properties to rent out it is also worth taking the time to review your circumstances. A meeting with an independent financial adviser or independent mortgage broker will help you take into consideration all factors in order to make the correct decision for your circumstances.

If you have a query regarding Mortgages and the Help to Buy Scheme please contact Ronan Marrion on 0800 0112825, e-mail or take a look at our website


(1) Telegraph

(2) Telegraph

(3) Telegraph


Your home may be repossessed if you do not keep up repayments on your mortgage.

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