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UK Mortgage Interest Rates Before and After the Help to Buy Scheme

Housing-Market / Mortgages May 31, 2016 - 12:12 PM GMT

By: MoneyFacts


Since the introduction of the Help to Buy Mortgage Guarantee Scheme in October 2013 the market for high loan-to-value mortgages has been well and truly shaken up. Indeed, as a result of the scheme, can reveal that the number of 95% loan-to-value (LTV) mortgages has jumped from just 56 products in October 2013 to 271 today.

Charlotte Nelson, Finance Expert at, said:

“In six month’s time, phase two of the Help to Buy initiative will terminate, marking the end of a successful Government drive to boost mortgage lending at higher LTVs. First-time buyers everywhere, regardless of whether they took advantage of the scheme or not, have a lot to thank it for - essentially, it acted as a catalyst for lending at 95% LTV and helped to bring a measure of normalcy back to the market. As a result, the number of products available at 95% LTV has increased by 383% since the start of the scheme.

“Before the initiative was announced, borrowers with a deposit of just 5% would have struggled to find a mortgage as many of the products on offer were only available to local areas or required a parent or guardian to guarantee the loan. If a borrower managed to find a suitable offer, the cost of the mortgage repayments was high. Today, the cost of a mortgage at this LTV is substantially cheaper; for example, the average rate of a two-year fixed rate mortgage at 95% LTV has fallen by a whopping 1.59% since October 2013.

“With the initiative set to end soon, borrowers who are contemplating a Help to Buy mortgage should perhaps cast their net wider and search the whole of the market - lenders outside of the scheme are now actively competing in this key area, so there could be better deals found elsewhere. For instance, the best five-year fixed rate mortgage at 95% LTV from the Help to Buy scheme is priced at 4.48% today; however, the best rate available overall stands at 3.79%.

“First-time buyers are often considered to be the lifeblood of a healthy mortgage market, so it’s possible that the removal of such an important and pivotal scheme will slow progress for these borrowers. Only time will tell what impact the end of the scheme may have, but for now small deposit-holders are in one of the best positions since the financial crisis, so they should take advantage of the deals available now to avoid disappointment in the future.” - The Money Search Engine is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.

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