Demand May Outstrip Supply As Mortgage Lenders Brace For Help-To-Buy Stampede
Over 600,000 residential properties are eligible for the £12 Billion (GBP) scheme, while Zoopla says buyers will still need average £10,000 (GBP) deposit
More than 600,000 residential properties on the market are eligible for inclusion in the £12 Billion (GBP) second phase of the Help-To-Buy scheme, according to the latest in a series of surveys leading to predictions that UK mortgage lenders will be inundated due to the expected demand for the government-backed mortgages.
Details of the 95% mortgages, which are available to existing property owners as well as first-time buyers, are to be unveiled by Chancellor of the Exchequer, George Osborne, with some banks expected to invite loan applications within hours of the announcement expected next week.
The second phase of the Government’s flagship scheme to allow more first-time buyers and second steppers, wider access to the UK’s residential property market has already been brought forward by three months, with high street bank Santander claiming that up to 1.7 million people want to use the scheme.
The Help-To-Buy scheme will cover existing residential properties as well as new-build properties, but as yet there are no plans to allow Buy-To-Let property investors use the scheme.
The acceleration of the Government’s Help-To-Buy scheme is going to allow more people to get on the property ladder, increasing the number of mortgage applications and the results could put more pressure on mainstream mortgage lenders to offer even better mortgage products. However many analysts reckon that in terms of gross mortgage lending, the UK is still below half of 2007 figures.
Mortgage brokers are predicting a surge in demand, that could be derailed by stringent eligibility checks from mortgage lenders, so prospective buyers are going to have to meet strict criteria in order to qualify for the loans.
Under the latest release of the Help to Buy scheme, prospective property buyers will need a minimum deposit of 5%, equivalent to about £10,000 (GBP) for residential properties in most regions of England and Wales and the Government have agreed to guarantee the next 15% of the property’s value.
The Help-To-Buy scheme is designed to encourage banks and building societies to offer cheaper mortgages to people who can only manage relatively small deposits to secure a property and Government ministers have claimed it could assist more than 500,000 property buyers over the next 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.
Assuming that the banks pass on all charges associated with The Help-to-Buy scheme, it could mean that first-time buyers face higher mortgage fees and interest rates than those borrowing to move house.
Mortgage lenders are expected to charge rates of around 5% for the Help-To-Buy mortgages and despite reservations, many economists predict a stampede of new mortgage applications.
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