Home buying, especially for first time buyers, has been a political hot potato since the housing boom went bust. Irresponsible mortgage lending, to people who could not keep up the repayments or found themselves in negative equity, was one of the main triggers for the economic crisis of 2008.
Since then, home ownership has been difficult to achieve; with less money to lend, lenders have been cautious about who they give it to. The result has been a stagnant housing market, which has only just been starting to show signs of recovery. For many would-be first time buyers, the impact of these broader structural problems has been a condemnation to a life of renting, whilst trying to save enough money for a deposit, commonly around 20 percent of the property price. Especially in expensive areas, such as the south-east, renting and trying to save has been an impossible task for many potential buyers.
The Government’s announcement in October 2013, that they had made plans to roll of out a new help to buy scheme, was met with enthusiasm. The details of the scheme were well-publicised; buyers need a five percent deposit. The Government underwrites the five percent. The scheme differs from the existing scheme, which has been available for a year, because it is available on all properties, so new build and resale ones, whereas the existing scheme was only available for new build properties. Under the existing scheme, the Government have provided a 15 percent deposit.
The mortgage is available on both new build and older properties. It is available to existing homeowners and also first time buyers. The scheme is available from January 2014, and is intended to run for three years. The scheme is available on properties up to the value of £600,000, although lenders can decide on which properties they will lend on. Although the scheme is not yet operational, the main lenders are already taking expressions of interest. It is expected that, once the scheme launches, other lenders such as Accord and Virgin Money might sign up.
Mortgage providers such as RBS, HSCB and Lloyds Banking Group have signed up to the scheme, and Barclays and Santander have expressed interest. Lenders who have announced their fees have placed their products competitively, with fees from as little as around £1000. NatWest and RBS have unveiled two-year, fixed-rate mortgages with a starting rate of 4.99 per cent. Halifax will charge 5.19 per cent for a two-year fixed term.
By early November, RBS, NatWest and Halifax had received over 2000 applications in advance of the scheme starting in January 2014. Halifax claimed that around 8- percent of their applications were from first-time buyers. These mortgages are competitive- not in comparison to those buyers who have large deposits themselves, but in relation to the other options available for first time buyers.