Mortgage blog: Why you don’t need Help to Buy to get the best 95% deal

Posted 13 November 2013

The Help to Buy scheme was launched with a promise to help first-time buyers and movers to access mortgage finance with just a 5% deposit. However, a comparison of the mortgage deals available to borrowers looking for 95% shows that it is small lenders – not those participating in the Help to Buy scheme – that are offering the lowest rates.

Buyers are being urged to shop around for the best mortgage deal and not to simply head directly to a Help to Buy lender.

Help to Buy deals not the cheapest 95% mortgages available

Help to Buy is designed to offer reasonably priced high loan-to-value mortgages. This is because the government has effectively guaranteed some of the risk the banks take when they lend to borrowers with small deposits. The Daily Mail concludes that “as a result, costs for lenders taking part in the scheme should be lower, which means that buyers can benefit from reduced rates”.

However, analysis of the deals currently available shows that there are a number of small lenders who are offering cheaper deals than the firms who have signed up to the Help to Buy initiative. For example, the Hanley Economic Building Society offers a two-year fixed rate of 4.89% to borrowers with a 5% deposit. There is a £350 fee and a free valuation for houses worth up to £250,000, plus £250 cashback, and Clydesdale and Yorkshire banks have a three-year fixed rate at 4.99%. There is no fee and the loan comes with a free valuation, as well as £250 cashback.

By comparison, NatWest and RBS have Help to Buy mortgages that are more expensive. Both offer a two-year fixed rate deal at 4.99 % and five-year fix at 5.49 % with no fee. However, borrowers have to pay for their valuation. Halifax and the Bank of Scotland’s Help to Buy deals are priced even higher and include a two year fixed-rate at 5.19 % with a £995 product fee.

Keith Osborne, editor of, says: “Considering that the government is sharing the risk with the lenders under the Help to Buy scheme it’s disappointing that the rates aren’t lower. What this shows is that borrowers should shop around for the best 90% or 95% deal and not simply be drawn to a Help to Buy mortgage. I expect larger lenders to cut rates in the New Year when Help to Buy really takes off but in the meantime there may be better options available elsewhere.”

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