This week sees the government bringing forward part of its flag-ship help to buy scheme by 3 months.
Help To Buy has many strings to its bow – equity loans, shared ownership, new buy and mortgage guarantees. It is the mortgage guarantee element of the scheme that will begin from the 7th of October.
Those with only a 5% deposit will be able to get a mortgage thanks to the government underwriting 15% of the loan.
This government guarantee is provided to the lender NOT the borrower. For Banks this takes away a huge amount of risk in lending to those with small deposits – mortgage lenders price products based on risk, the greater the level of deposit you are able to raise, the lower risk to are and the lower the interest rate will be – and lower interest rates mean lower monthly payments.
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