The second phase of help to buy has enabled nearly 100,000 to buy a home since it’s launch. It has allowed a greater number of lenders to come into the 95% loan-to-value market, meaning customers have more choice.
There have actually been 95% mortgages around for many years now, but only a limited number of lenders were offering them, often with strict criteria. So it’s not so much that help to buy has created a market, but has massively expanded one. Those who have benefited most from it, are people who don’t have straight forward circumstances. If say, you need to find a lender who will lend you a lot in comparison to your income, or one that doesn’t need you to have a 999 credit score, or maybe your employment situation isn’t straightforward, then you need to have a wide choice of lenders so that you can find one to fit your needs.
The help to buy 2 scheme is due to expire at the end of 2016. So if you are in the process of saving and want to use the scheme, the clock is ticking. Although unlikely, it may well be that they extend the scheme, or they make a new, possibly watered down scheme to replace help to buy 2. What may be more likely is that lenders start to take the risk on themselves or offset the risk by charging customers higher lending charges so that they can buy an insurance policy to offset the risk. This would be very similar to what is happening now with help to buy 2, but without the governments’ involvement. However, you shouldn’t plan your finances in hope that any of these will happen, because it is a gamble and it may be that if you miss the deadline, you need to save another 5 or 10 percent before you can get your foot on the ladder.
The current mortgage environment isn’t what it was eight years ago when money was being lent to anybody and everybody. If you have an adverse credit history, no way of saving for a deposit, or need to self-certify your income, you may be waiting a long time before you are able to apply for a mortgage. However for those who do have a 5% deposit and can get a mortgage, this could be an ideal environment for them given the ultra low interest rates that are available. With just a 5% deposit there are mortgages out there at the moment, which have interest rates below 4%. Surely these low rates won’t last for long either, due to a combination of potential interest rate rises in the future, lenders’ realising they are squeezing their profit margins too much and the help to buy 2 scheme coming to an end, rates will have to go up at some point.
So if you are thinking of buying a house one day, or even just saving to buy a house one day, start thinking now because things may never be this good again in your lifetime. I’m not saying it is a good time because house prices are going to go up, because I genuinely don’t know, they could go either way and I think it is best to ignore those types of speculation sometimes, because that is all you can do, speculate. But what I can say is that there are plenty of options out there for people at the moment, more than there have been for many years, and there is no guarantee that there will be as many options in the future.
Jason Hinde DipPFS
30th March 2015
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