Lloyds Bank is the latest lender to offer mortgages to borrowers with a 5% deposit as part of the Help to Buy scheme.
Lloyds Bank is the latest lender to enter the Help to Buy market, launching two mortgages designed for borrowers with 5% deposits.
If you’re happy to pay a £995 fee, you can get a two-year fixed rate at 5.39%. Otherwise there is a fee-free version at 5.79%.
If you hold a Lloyds current account, you get a 0.2% discount on the rate, so the fee-paying rate drops to 5.19% and the fee-free mortgage has a rate of 5.59%.
The mortgages will be available in branches from Friday 3rd January.
How Help to Buy works
Help to Buy is actually two different schemes falling under the same umbrella. These mortgages tie into the second scheme: the Help to Buy mortgage guarantee. This is where the mortgage lender offers a deal at 95% loan-to-value, knowing that the Government is acting as ‘guarantor’ on the mortgage, essentially agreeing to step in and compensate the lender should you end up being repossessed.
[SPOTLIGHT]For a full breakdown of how both parts of Help to Buy work, read Help to Buy mortgages explained.
How the mortgages compare
Lloyds joins Aldermore and Virgin Money as new entrants to the Help to Buy mortgage guarantee scheme, with TSB and Santander set to launch deals this month too.
NatWest, Royal Bank of Scotland, Halifax, Bank of Scotland, HSBC and Barclays all have deals on offer already.
When it comes to two-year fixed rate deals available at 95%, whether as part of the Help to Buy scheme or not, the new Lloyds mortgages aren’t great, as the table below demonstrates.
|
Lender |
Initial interest rate |
Fee |
More information |
|
Accord Mortgages |
4.69% |
£975 |
|
|
Norwich & Peterborough Building Society |
4.69% |
£845 |
|
|
HSBC |
4.79% |
£99 |
Call 0808 115 8734 |
|
Norwich & Peterborough Building Society |
4.89% |
£0 |
|
|
HSBC |
4.99% |
£99 |
Call 0808 115 8734 |
|
NatWest |
4.99% |
£0 |
Call 0800 056 0791 |
|
Royal Bank of Scotland |
4.99% |
£0 |
Call 0800 096 7404 |
|
Halifax |
5.19% |
£999 |
|
|
Virgin Money |
5.29% |
£99 |
Call 0845 805 4739 |
|
Lloyds Bank |
5.39% |
£995 |
Available in branches |
|
Halifax |
5.59% |
£0 |
|
|
Newcastle Building Society |
5.59% |
£195 |
|
|
Lloyds Bank |
5.79% |
£0 |
Available in branches |
As you can see, the Lloyds rates are far from market leading, even when you take off the 0.2% for existing current account holders. Indeed three of the top four deals come from lenders who many people will not be too familiar with.
Is Help to Buy working?
There has been a lot of talk over the last few weeks about Help to Buy and whether it may contribute to another housing bubble, with even a member of the Cabinet calling for it to be reassessed.
The idea behind the two parts of the scheme is to help people access the housing market who would otherwise struggle to own their own homes. The Government has now released figures on the mortgage guarantee scheme’s performance since its launch in October, revealing that nearly 750 homes have so far been purchased as a result, while 6,000 people have made offers on properties thanks to the mortgages.
Meanwhile the Help to Buy equity loan scheme has so far helped 20,000 households.
What do you think? Should Help to Buy be reassessed? Let us know your thoughts in the comments box below.
See how much a mortgage could cost you and get help from an expert mortgage adviser
This article aims to give information, not advice. Always do your own research and/or seek out advice from a regulated broker, before acting on anything contained in this article.
Your home or property may be repossessed if you do not keep up repayments on your mortgage.