Posts tagged ‘Mortgage loan’
Almost 750 borrowers have bought a new home using the Help to Buy mortgage guarantee scheme, according to new figures.
The data was announced by Downing Street today and is based on completed mortgage applications with Lloyds Banking Group and RBS.
The Help to Buy mortgage scheme was introduced three months earlier than anticipated in October and aims to help people buy homes with a deposit of as little as 5 per cent.
A further 6,000 people have made offers on properties, it suggested.
It comes after the business secretary Vince Cable called for the scheme to be re-examined, saying: “There is a raging housing boom in London and the South East – not in other parts of the country.”
He said the boom could get “out of control” unless interest rates were raised – but doing this would “hit those parts of the country which are not yet fully recovered”.
The Government’s mortgage guarantees officially start today. However, banks were able to start offering the loans from the beginning of October last year as it would have been technically impossible to default on the home loan during these last three months.
The mortgage guarantees are the second phase of the Government’s Help to Buy scheme. The first phase was introduced last April and provides a Government loan of up to 20 per cent of the value of a new build home, interest free for the first five years.
In November, the Government said the Help to Buy equity loan scheme helped 5,375 buyers during its first six months.
Participants bought properties with an average value of £194,164, with the average equity loan being £38,703, according to the official figures issued by Communities and Local Government.
The majority of homes bought as part of the equity loan scheme were made by first-time buyers, totalling 92 per cent. It means the Government issued £208m in equity loans.
The Help to Buy equity loan scheme had only been available in England and Scotland, but the Help to Buy equity loan launches in Wales today.
An interest-free loan of almost £40,000 from the Government is being given to 30 borrowers a day to help them buy a new home.
The loan is being issued under the Government’s Help to Buy equity loan scheme, launched in April.
The scheme helped 5,375 buyers during the first six months, according to the official figures issued today by Communities and Local Government.
Participants bought properties with an average value of £194,164, more than £20,000 higher than the average price of a home. The average equity loan was £38,703.
The majority of homes bought as part of the equity loan scheme were made by first-time buyers, totalling 92 per cent.
It means the Government issued £208m in equity loans.
The Help to Buy scheme was announced by the Chancellor in this year’s Budget and has two parts – equity loan and mortgage guarantee.
Under the equity loan scheme, the Government provides a loan of up to 20 per cent of the value of a new build home, interest free for the first five years. Borrowers provide a 5 per cent deposit and a mortgage of 75 per cent.
In the sixth year, borrowers will be charged a fee of 1.75 per cent of the loan’s value, after which the fee increases every year. The increase is based on the Retail Prices Index, plus 1 per cent.
The scheme is only available on new build properties.
Under the new mortgage guarantee scheme, the buyer also only needs a 5 per cent deposit.
The Government and the bank then jointly guarantees up to the next 15 per cent of the property’s value, in return for a fee paid for by the lender.
Borrowers with a deposit of just 5 per cent are being fought over by lenders, triggering a mortgage rate war.
Yorkshire Building Society is the first lender to enter the ring after launching a fiercely competitively range of home loans for those looking to borrow up to 95 per cent of a property’s value.
It means borrowers can buy an average home costing £170,000 with a deposit of £8,500.
With rates of 4.69 per cent, it means they pay £915 a month in mortgage payments.
Until today, Yorkshire building society only lent to those with a 10 per cent deposit after withdrawing 95 per cent deals at the height of the credit crisis in 2008.
More lenders are understood to be lining up to launch similar deals, including HSBC, Barclays and Santander.
It comes as the Council of Mortgage Lenders reported the highest level of mortgage lending since October 2008 at £18.6bn.
Lending to those with a small deposit is controversial amid concerns that it can lead to them to borrow more than they can afford.
Yorkshire’s chief executive Chris Pilling said: “Our fundamental role as a building society is to support as many people as possible to achieve their aspirations to buy their own home.”
He said it was vital that loans were made in a ‘responsible and prudent way’.
It follows the launch of the Government’s Help to Buy scheme this year. The scheme aims to help those with a small deposit with the help of interest-free equity loans and a mortgage guarantee.
The Yorkshire’s products are not part of the Government’s scheme.
Three homes for sale at £170,000:
The Help to Buy scheme is assisting 75 borrowers a day in their hunt for a new home, the first official figures reveal.
In total, more than 2,000 borrowers have put in offers on homes under the scheme, which helps those with a deposit of as little as 5 per cent.
So far, 10 of the 2,384 mortgage applications have completed, meaning borrowers have already moved into their homes, according to the figures published by the Government.
It means a total of £365m in new mortgage lending, with the average loan being £155,000 for houses worth £163,000. All of the applications have been via RBS and Lloyds.
More than three quarters of the applicants are first time buyers and many are in their early thirties, according to the statistics issued by the Government department Communities and Local Government.
Prime Minister David Cameron said: “Four weeks in and it’s clear that Help to Buy is already delivering. In just one month, over 2,000 people have been accepted for a Help to Buy mortgage. Or put another way, 75 families every single day have been put on the path to owning their dream home.
“But the best thing about Help to Buy isn’t the statistics – it’s who is really benefiting. Most Help to Buy applicants are first-time buyers, young and have a roughly average household income. This is all about helping hardworking people get on the first rung of the property ladder – and helping them get on in life.
“Owning a home is about more than four walls to sleep at night. It’s about independence, self-reliance, moving on and moving up. Above all, it’s about aspiration. Help to Buy is helping people realise the dream of home ownership – and it’s a key part of my plan for Britain.”
The Government suggested applicants face average monthly repayments of around £900 and have an annual household income of around £45,000, meaning a Help to Buy mortgage represents 24 per cent of borrowers’ gross income.
It said applications were from across the country with more than three quarters coming from outside London and the South East.
The Help to Buy mortgage guarantee scheme offers lenders the option to purchase a Government guarantee on mortgages on both new build and existing homes, where a borrower has a deposit of between 5 per cent and 20 per cent.
High Street banks including Natwest, RBS, Halifax (part of the Lloyds Banking Group) and Bank of Scotland have already started offering mortgages supported by the Help to Buy mortgage guarantee scheme. HSBC, Barclays, Santander, Virgin Money and Aldermore have also confirmed they will join the scheme in the coming months.
Earlier this year, the Government launched the Help to Buy equity loan scheme, available to those who aspire to own a new build home, but struggle to access or afford the repayments on a low deposit mortgage. Under the scheme, the Government provides an equity loan worth up to 20 per cent of the value of a new build home, interest free for the first five years, to be repaid on sale or when the mortgage is repaid. The maximum home value is £600,000, and the scheme is open to first-time buyers as well as to those looking to move up the housing ladder.
The launch of the latest phase of the Government’s Help to Buy scheme has generated a huge amount of interest from buyers. But an understanding of exactly how the scheme works remains sketchy, with borrowers wanting to know if they meet the criteria to apply.
Here, Zoopla answers some of the main questions home buyers are asking.
Further detail is also available on Zoopla’s Help to Buy page and please feel free to join us for a live webchat this Friday 10/25/2013 2:00pm – 3:00pm via blog.zoopla.co.uk/help-to-buy-live/
Q: Is the scheme only for first-time buyers?
A: No, the mortgage guarantee scheme applies to first time buyers as well as those who have an existing home and are looking to move. However, the property must be your residential home and cannot be a buy-to-let property.
Q: I hear the mortgage guarantees are not being introduced until January 2014, can I move before then?
A: Yes, you can. The mortgage guarantees are not being introduced until January 2014, but it means lenders are now offering cheaper home loans as it is impossible to default on a mortgage before the end of the year.
Q: Can I only buy a new build property with the scheme?
A: No, the mortgage guarantees apply to both new build and existing properties up to the value of £600,000. The first phase of the Help to Buy scheme – known as equity loan – is for new build homes only.
Q: Can I buy a property regardless of my salary?
A: Essentially, a Help to Buy home loan with a mortgage guarantee is the same as a ‘normal’ mortgage, so the same terms and conditions apply between you and the lender. In most cases, lenders lend three or four times your annual salary.
Q: Am I restricted on the number of bedrooms?
A: No, there is no restriction on the number of rooms. However, there is a restriction on the value of the property, which is up to £600,000 under the mortgage guarantee scheme.
Q: Does the scheme apply to anyone living in the UK?
A: Yes, the mortgage guarantee is available to all UK citizens. It is in contrast to the equity loan phase of the scheme, which is available in England and is for new build homes costing up to £600,000. Scotland has its own equity loan scheme for properties up to £400,000, while Wales is expected to announce a version soon.
Q: Will different lenders offer separate Help to Buy mortgage rates under the scheme?
A: Yes, different lenders set their own terms and rates – although the Government-backed guarantee means the rates should be lower than they would have otherwise been for those buyers with a smaller deposit.
Q: Are the mortgage guarantees just an extension of the equity loan scheme scheme announced earlier this year?
A: No, the mortgage guarantee is a Government-backed guarantee only. There is no equity loan, as with the first phase of Help to Buy launched earlier this year.
Q: Which phase of the scheme is best for me?
A: One of the key differences between the two schemes is that buyers purchase 100 per cent of a property with the mortgage guarantee, whereas they purchase only 80 per cent under the equity loan scheme (where the Government provides an equity loan to cover the remaining 20 per cent). In addition, the equity loan scheme is only available on new build properties.
Got more questions? Join us for a live webchat this Friday 10/25/2013 2:00pm – 3:00pm via blog.zoopla.co.uk/help-to-buy-live/
The Help to Buy schemes are subject to terms and conditions. Please check eligibility criteria with your mortgage advisor or IFA.