Mortgage blog: Help to Buy rates start to rise

Posted 9 May 2014

House buyers are being urged to shop around for 95% mortgage deals after two of the UK's biggest mortgage lenders became the first to raise the rates on their Help to Buy products.

Help to Buy - which offers access to low-deposit mortgages - has been credited in recent months with helping the housing and mortgage market to recover. Now, though, Santander and NatWest have increased the cost of their deals and other lenders could follow suit.

Santander and NatWest hike Help to Buy rates

Two of the UK's biggest lenders have raised their Help to Buy rates in a sign that mortgage companies are set to increase the cost of borrowing for first time buyers. While Santander and NatWest have only increased the cost of their deals by a small amount, experts are warning that other lenders could also increase the cost of borrowing ahead of a possible base rate rise in 2015.

Santander said it would increase the rate on its 95% loan-to-value (LTV) two-year fixed-rate mortgage by 0.1%, going up to 5.09%, fixed until July 2016. NatWest has increased rates by between 0.1% and 0.4%.

A Santander spokesman said: "Santander regularly reviews its mortgage range to ensure competitive positioning in the market. In line with market conditions we have re-priced a selection of two and five year fixed products."

Borrowers urged to shop around for the best deal

The Daily Telegraph reports that the government's Help to Buy scheme ‘has played a large part in stimulating the mortgage market, amid a fresh surge in demand and prices.'

A number of lenders are participating in the Help to Buy scheme through which borrowers provide a 5% deposit while the lender buys a government guarantee covering up to 15% of the value of the property. While there are lots of Help to Buy deals available, experts are urging borrowers to shop around before taking out a loan as there are standard 95% deals that undercut Help to Buy rates.

Keith Osborne, editor of, said: "When looking for a 95% mortgage it's easy to head straight for the Help to Buy deals. However, there are lots of other deals available, often with smaller building societies, which offer better value. For example, Hanley Economic Building Society is currently offering a two-year discount rate for 95% mortgages at just 4.19%. This is significantly cheaper deal than Santander's 5.09% two-year fixed rate or NatWest's 5.39% deal."

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



Click here to see your activities