Help to Buy 95% mortgages: second phase brought forward

Mortgages and Home

Updated on 30 September 2013 | 2 Comments

The Prime Minister made the surprise announcement ahead of the Conservative Party Conference.

Prime Minister David Cameron has announced that the second phase of the Help to Buy mortgage scheme will launch this week, three months earlier than planned.

He made the surprise announcement in interviews in newspapers and on TV ahead of the Conservative Party Conference.

Halifax, NatWest and Royal Bank of Scotland have signed up to offer 95% mortgages on any properties valued up to £600,000 in this second phase, providing the homes are not put up for rent. Other lenders are expected to sgn up shortly.

The initial phase of Help to Buy launched in April, and allowed borrowers to take out a 95% mortgage on new-build homes only, with 75% funded by a lender and 20% by the Government.

In the second phase, the Government will guarantee the mortgages taken out. It has set out £130 billion over the next two years for this. The Government will charge lenders a fee for this 'insurance', although it hasn't announced how much this will be yet.

Critics of the scheme, including Business Secretary Vince Cable, say Help to Buy is inflating another property bubble by pushing up house prices.

The Prime Minister refuted this, saying: “If we don't do this it will only be people with rich parents to help them who can get on the housing ladder – that is not fair, it is not right."

The Bank of England has announced that its Financial Policy Committee will be monitoring the housing market closely for signs of a bubble building.

A reduction of the price cap down from £600,000 and an increase in the level of fees charged on Help to Buy mortgages are among the measures that could be used if it's felt it's overheating the market.

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