The government has closed the Help to Buy mortgage guarantee scheme that has helped 86,341 first timer buyers on to the housing market.
The Help to Buy scheme was first launched in October 2013 to boost lending with high loan to values (LTV) requiring only a 5% deposit from first time buyers with the government providing a 15% mortgage guarantee to the lender.
It has supported 86,341 new homeowners since launch, increased competition and allowed people to buy a property when at a time lenders demanded large deposits.
The Chancellor Philip Hammond said there were 30 commercial lenders offering loans outside the Help to Buy scheme and it had successfully achieved its purpose to kick start the mortgage market and would expire at the end of 2016.
Use of the scheme has reduced
During a review, the Financial Policy Committee (FPC) said the scheme was in decline and only accounted for 3% of total mortgage lending in the first quarter 2016 compared to 6% in 2014.
For those offering deposits of under 10% the Help to Buy mortgage guarantee scheme only accounted for 25% of lending in the first quarter 2016 compared to 70% in 2014.
The FPC has said that the decision to close the scheme is unlikely to significantly affect the provision of mortgages to first time buyers.
Many of the homebuyers through the scheme were purchasing lower value properties worth an average of £157,000 compared to the national average of £216,000.
Philip Hammond said the mortgage guarantee scheme has not been a material driver of house price growth.
It is important to note that the end of this particular scheme does not diminish in any way the government’s commitment to supporting those looking to get on the housing ladder, says Mr Hammond.
Other schemes to continue
The Help to Buy equity loan scheme is scheduled to run from 1 April 2013 until 31 March 2020 and offers first time buyers or home movers a 20% interest free loan for five years.
This scheme is not available to remortgage buyers or buy-to-let investors and is designed to help people with lower incomes or smaller deposits to become homeowners.
The buyer only requires a 5% deposit for properties valued up to £600,000 and with the 20% government loan they need to arrange a 75% loan to value (LTV) mortgage from a lender.
The scheme is only available for new build homes and you must payback the loan after 25 years although you can repay the loan from the government at any time without penalty.
Help for younger buyers can come from family members as the equity release mortgage buyer can access wealth to consolidate debt or give a child or grandchild the deposit on their first home.
Of the 91,759 properties purchased using the Help to Buy equity loan scheme about 81% have been first time buyers with an average price of £226,887.
What are your next steps?
Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.
Learn more by using the property value tracker chart, mortgage costs calculator and equity release mortgage calculator. Start with a free mortgage quote or call us and we can take your details.
For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property for home improvements, holidays or even give to a family member.
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