Mortgage blog: Slow start for new phase of Help to Buy scheme

Posted 17 October 2013

Announced with a fanfare by the government and launched three months ahead of schedule, the second part of the Help to Buy scheme is designed to help you to get on their property ladder or move home with just a 5% deposit. However, with the scheme now fully operational, there has been a lukewarm initial response from lenders despite strong demand from borrowers.

We look at why the majority of lenders are still not signed up for the scheme and what you can expect in terms of deals if you're interested in taking advantage of the initiative.

Slow start for flagship scheme

The government's initiative is designed to allow those who can afford only small deposits to buy a home. However, the BBC reports that just a handful of lenders have so far signed up to the flagship scheme.

RBS, NatWest and Halifax have already started taking applications under the scheme with HSBC, Virgin Money, Lloyds, TSB and Aldermore set to join later. Even then, this only accounts for around 40% of the UK mortgage market. The BBC reports that three large UK lenders - Barclays, Santander and Nationwide - remain undecided on whether to join.

Keith Osborne, editor of, says: "The government only published full details of the scheme very recently and so many lenders haven't had the opportunity to judge whether the scheme is economically viable for them. In return for a government guarantee of 15% of the loan, lenders will have to pay up to 0.9% of the original mortgage. So banks and building societies have to take this fee into account before determining whether they're happy to offer deals under Help to Buy."

Prime Minister David Cameron said he was happy with the interest being shown so far: "I am very content that we are going to get a good range of products in the market and that is going to help people who want to get on to the housing ladder, who want to own their own home, who can afford mortgage payments but can't currently get mortgages. Those are the people we want to help."

Lenders unveil the first set of Help to Buy rates

In terms of the rates that are available, RBS and NatWest are offering a two-year fixed-rate mortgage starting at 4.99% if you have a 5% deposit, with no fee. Halifax is offering a rate of 5.19% with a £995 fee.

According to financial analysts Moneyfacts the rates are much higher than the deals available to borrowers with a larger deposit. Moneyfacts say that if you have a 10% deposit you can benefit from a deal at 3.54%, with a fee of £1,675.

Click here to find out more about how can help you find the right mortgage.



Click here to see your activities