Help to Buy is here to save the housing market – or so the government would have us believe.
Those with only a 5% deposit will now be able to secure a mortgage with RBS, Halifax and Natwest – other banks will follow later in the year. The government will underwrite 15% of the loan for the lender – effectively making it a lower risk proposition – and encouraging the banks to lend.
The theory behind help to buy is that everyone wins
The government charges a small fee – expected to be 0.9% for the guarantee – good news for the government – unless the loans go bad.
The banks lend money – at a competitive rate with a lot less risk than previously – good news for the banks all round – as even if the loan goes bad they’ve got the government to fall back on.
Those with small deposits get a mortgage and can get a foot on the housing ladder.- great for those who can’t save the 10-20% needed to normally get a loan.
Without wanting to put a dampener on things people need to remember that the basic principles of buying a house still apply.
- Look at the fees associated with purchase
- Consider other costs – surveys, valuations, stamp duty
- Would you be able to afford the mortgage payments if interest rates go up
- Check your credit history
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