Home-to-Buy rush expected with 600,000 homes eligible
Thu 07 Nov 2013
eligible for the second phase of Help to Buy. The scheme applies to any home up to a value of 600,000. Zoopla
said that the average minimum deposit required to buy an eligible property was less than 10,000 in six of 10
regions in England and Wales: north-west and north-east England, the east and west Midlands, Yorkshire and the
Humber, and Wales. With the average asking price standing at 222,168, the required 5% deposit would be
11,108. But in London, where prices have been rising the fastest in the country in recent months, the figure
would be 16,100.
Under the second part of Help to Buy, the government is making available 12bn of guarantees to lenders,
though just three banking brands have indicated they will be offering the new deals from the outset: these are
Royal Bank of Scotland, its NatWest arm, and Halifax.
RBS and NatWest said that from the launch date of the scheme customers would be able to visit any of their
2,000 branches or phone for advice. They added that opening hours would be extended at more than 740
branches across England, Scotland and Wales "to help with customer demand".
Estate agents and mortgage brokers have reported an increase in inquiries from buyers. Peter Rollings, chief
executive of the London-based estate agent Marsh & Parsons, said the new phase of Help to Buy would be "like a
shot of adrenalin". He said of the London market: "The capital needs this stimulus to free up mid-ladder buyers
who want to become first-time sellers. This will create a much healthier balance between supply and demand."
Many experts have argued that the government should ditch the second phase of Help to Buy, because they fear
it will artificially inflate house prices too much by ramping up demand at a faster rate than the supply of homes
coming on the UK market. Mortgage availability has become more widespread following the launch of the
government's funding for lending scheme in August last year, giving lenders access to cheap finance in order to
help borrowers. The first phase of Help to Buy provides equity loans but only applies to purchasers of new-build
properties. The government has brought forward the second phase of Help to Buy despite opposition from within
the coalition, including from backbench Conservatives.
Help to Buy scheme Property First-time buyers Mortgages Mortgage rates Banks and building societies Mortgage
lending figures Housing market Real estate Housing Communities Rupert Jones
Over 600,000 houses are eligible for the 12bn scheme, while Zoopla says buyers need average 10k deposit
More than 600,000 homes on the market are eligible for inclusion in the 12bn second phase of the Help to Buy
scheme, according to the latest in a series of surveys leading to predictions that lenders will be flooded by
pent-up demand for the government-backed mortgages.
Details of the 95% mortgages, which are available to existing homeowners as well as first-time buyers, are to be
unveiled by the chancellor , with some banks expected to invite loan applications within hours of the Tuesday
announcement. The second phase of the flagship scheme to give more first-time buyers and others wider access
to the housing market was brought forward by three months, with a report from high street bank Santander
claiming that up to 1.7 million people are planning to use the scheme.
"It is going to accelerate more people going into the market, so the number of mortgage applications will increase
and that will put more pressure on lenders and their [loan] processing," said David Hollingsworth of broker London
& Country Mortgages. "But in terms of gross [mortgage] lending we are about less than half where we were in
Another mortgage broker predicted a surge in demand, stoked by media coverage of the scheme, that could be
blunted by stringent eligibility checks from lenders. "A lot of people want to get on the property ladder and the
lenders who come out with these products will be inundated with inquiries," said Andrew Montlake of Coreco. "But
lenders are not going to suddenly forget about being prudent, so people are going to have to qualify for the
Under this part of the Help to Buy scheme, buyers will need a minimum deposit of 5%, equivalent to about
10,000 for eligible homes in most regions of England and Wales. The government guarantees the next 15% of
the property's value. The scheme is designed to encourage banks and building societies to offer more, and
cheaper, mortgages, to people who can only manage relatively small deposits to secure a property.
Unlike some previous government home-buying initiatives, this one covers existing homes as well as new-build
properties. Ministers have claimed it could assist more than 500,000 buyers over three years.
The level of interest rates that will be offered has yet to emerge, but banks have indicated that would-be buyers
should not expect cheaper mortgages.
The Treasury is also likely to charge more to effectively insure loans to borrowers with the smallest deposits.
Assuming the banks pass on the charges it means first-time buyers are still likely to face higher mortgage fees
and interest rates than those borrowing to move house. Lenders are expected to charge rates of around 5% for
the Help to Buy mortgages. Despite those reservations, mortgage commentators have expressed fears of a
stampede for new applications. Research published on Friday found that two-thirds of adults under the age of 30
planned to buy their first home or move house during the three-year lifetime of Help to Buy.
The data, from the broker called the Mortgage Advice Bureau, also found that 20% of young adults said they
were more likely to buy due to the scheme.
The property website Zoopla.co.uk has estimated that there are about 665,000 properties now on sale that are