Belfast Telegraph

Lenders undecided over Help to Buy

Many aspiring home buyers who are pinning their hopes on the launch of new low-deposit state-backed mortgages in the coming days will be left disappointed, experts have warned.

Several major mortgage lenders have yet to decide whether they will take part in the new phase of the controversial Help to Buy scheme, despite the Government's announcement that people will be able to start applying for the new mortgage guarantee from next week.

State-backed lenders Royal Bank of Scotland (RBS) and Lloyds Banking Group, which together account for about one third of the mortgage market, have already confirmed they will be taking part in the initiative, after the launch was brought forward from next January.

But several other major mortgage providers are still waiting for further details about the scheme before deciding whether to add their names to the list.

Meanwhile, experts warned that many would-be borrowers whose expectations have been ramped up by news of the scheme's launch will find they still do not meet lenders' criteria.

The initiative, which is set to run until January 2017, will see the state offer guarantees totalling around £12 billion to unlock £130 billion of high loan-to-value mortgage lending .

Phase two of Help to Buy will initially be available under the NatWest, RBS and Halifax brands, with more providers expected to come on board.

But details of what rates will be on offer and exactly when the products will hit the high street are yet to be revealed.

The scheme, which has sparked fears of a new housing bubble, will allow people with a deposit as low as 5% to buy a new or existing home worth up to £600,000.

But Ray Boulger, senior technical manager at mortgage adviser John Charcol, suggested that many would-be buyers who are pinning their hopes on the scheme will end up "disappointed".

He said they may find they do not meet the tough checks the Government has promised will be in place to make sure borrowers can afford to pay back their loans.

Mr Boulger said: "Unfortunately there are a lot of people who may think this is going to be their nirvana and for various reasons they won't qualify, perhaps because they have not got enough income or do not meet credit requirements."

Other Government schemes such as Funding for Lending have already boosted mortgage availability, which has in turn ramped up demand in the housing market and prompted concerns that the market could be heading for another property boom, with borrowers over-stretching themselves.

According to financial information website Moneyfacts, the number of products for people with a 5% deposit has risen by almost two-thirds over the last year, with 69 deals currently on the market.

The average rate on a five-year fixed rate mortgage for someone with a 5% deposit has edged down from 5.77% a year ago to 5.20%.

Moneyfacts spokeswoman Charlotte Nelson said: "Despite predictions that this scheme will boost the market further and increase choice to borrowers, strict credit criteria is still prevalent banks, which can cause difficulty for many."

She added: "Many big lenders such as Santander, HSBC, Nationwide and Barclays are likely to wait for final terms and conditions before getting involved."

The first phase of Help to Buy launched earlier this year and that part of the scheme is specifically aimed at giving people buying new-build properties a helping hand.

Several major mortgage providers said they are still mulling over the fine details of the second phase of Help to Buy.

A spokeswoman for Nationwide said the building society, which already offers mortgages to home buyers with 5% deposits, has not yet made a decision about whether or not it will participate.

Meanwhile, Santander said in a statement: "We are still examining the detail of how the second stage of H2B (Help to Buy) will work.

"Santander is supportive of all initiatives, in general, that ease the flow of credit to consumers."

A Yorkshire Building Society spokesman said the mutual has not yet made a decision, adding : "We continuously review our range of products and services, and assessing Help to Buy forms part of detailed work being carried out."

HSBC is also still reviewing whether it will take part and a spokesman said the mortgage provider is generally "supportive" of the scheme.

Barclays confirmed it is also still weighing up what to do. Barclays already offers mortgages to people with a 5% deposit through its "family springboard" mortgage which involves the borrower's parents putting some money into a savings account which is linked to the mortgage.

Lloyds Banking Group, which owns Halifax, has so far only confirmed that it will be introducing products "in the coming weeks" under the Halifax brand. Further details are expected soon.

RBS group, which operates 2,000 branches through the RBS and NatWest brands, has said it aims to sign up 25,500 customers through the scheme and said opening hours would be extended at peak times to cope with customer demand.