Help to Buy ends but 95% mortgages still widely available

After supporting 95,000 mortgages since its launch in 2013, the government's flagship Help to Buy scheme closed on 31st December.

While the closure of the scheme has been seen as a blow to buyers with a small deposit, research has found that there are plenty of low deposit deals still available.

257 products still available for borrowers with 5% deposit

Finding the deposit has long been one of the biggest problems facing first time buyers. As a result, the government introduced the Help to Buy scheme in October 2013 in order to encourage lenders to offer high 'loan to value' mortgages.

Mortgage lenders that participated in the guarantee scheme were able to get government-backed guarantees on every high loan to value mortgage they offered. As a result, lenders offered more of this type of mortgage and at lower rates, as they had the security that they would be compensated if borrowers defaulted on their payments.

The scheme ended on 31 December having supported 95,000 loans but despite the closure research has found that there are still plenty of low deposit mortgages available. Consumer group Which?  has revealed that there are still 257 products available for buyers with a 5% deposit - a significant increase on three years ago.

The data shows that at the end of December there were 490 mortgages available for borrowers with a 15% deposit, 479 for those with a 10% deposit and 257 for those with a 5% deposit.

The analysis revealed that just 4% of these were Help to Buy mortgages, meaning that despite the end of the scheme, there are still lots of ways for people with a low deposit to buy a home.

Help to Buy has also resulted in a better choice for borrowers. For example there were just 97 deals available to buyers with a 5% deposit in October 2013 compared to 257 at the end of December 2016.  The average interest rate on 95% mortgages has also significantly decreased, from 5.05% in October 2013 to 4.07% in December 2016.

Two in five first-time buyers cite deposit as biggest obstacle

The availability of low deposit mortgages remains of huge importance to buyers, as a new survey has revealed. Research by YouGov for Aldermore shows that because of the impending closure of Help to Buy, over half of those who were planning to purchase for the first time are having to change their plans.

The survey reaffirms that the biggest obstacle for potential first-time buyers is the deposit (39%) compared to high property prices (34%).

Mortgage expert Patrick Bamford says: "There continues to be many potential homeowners who, if they could get a big enough deposit together, would actually be paying less on their monthly mortgage than they currently pay on rent.

"However, it’s getting to that deposit level which remains a huge barrier, especially given the level of rents – plus if you cannot call upon the Bank of Mum and Dad or another kindly relative then reaching that deposit level can seem impossible."