Comment: Happy fifth birthday, Help to Buy

Many of the initial purchasers will be looking to remortgage soon

Pad BamfordThe Help to Buy scheme has dominated the UK housing market for the best part of five years, in large part because of its perceived success and the government’s understandable focus on trying to – literally – build on that.

Hence, there has been Help to Buy 1 and 2, as well as its regional offshoots and the Help to Buy Isa. But we are about to enter a new phase for the scheme, which should reveal whether there has been sufficient forward-thinking about what happens next for HTB1 borrowers, and whether the government and lenders are prepared to meet remortgage demand.

As we know, HTB1 purchasers have a five-year interest-free period, so those who bought at the very start of the scheme are nearing the end of it. These government equity loans either need repaying or the borrowers will have to pay their 1.75 per cent (of the loan) fees, which will rise each year by RPI-plus 1 per cent.

A Question of equity

Many homeowners will want to remortgage to avoid paying the fees but there are going to be questions as to the equity they have in their homes, whether they can secure a competitive remortgage, and indeed whether there are enough lenders willing to allow remortgaging in this instance.

At the moment, most of the mainstream banks will allow this, as will a number of building societies. But I suspect there will be a sense of trepidation from many borrowers, especially when new-build properties tend not to significantly increase in value in their early years, meaning the equity levels the owners might well have expected are not there.

It is a conundrum, particularly when considering how different the mortgage market looks now compared to five years ago.

Advisers have a considerable role to play in ensuring those borrowers able to remortgage can do so with competitive products. The market for such remortgaging activity is in its infancy and its success, or otherwise, will determine the legacy of the Help to Buy scheme.

Pad Bamford is business development director at AmTrust Mortgage & Credit

Recommended

Money, cash, calculator

Govt eyes Help to Buy loan book sale

The Government wants to sell its £7.4bn book of Help to Buy equity loan scheme mortgages and is speaking to investors. The Financial Times reports that the Government is keen to offload the portfolio by November and is in talks with large asset managers. Help to Buy loans have no interest on the Government portion […]

China tech and Global Alpha: a new great leap forward

By Robin Geffen, Fund Manager and CEO

Internet giant Alibaba is exactly the type of entrepreneurial company that the high-conviction, top-performing Neptune Global Alpha Fund seeks to invest in. Established just 14 years ago in an apartment in Hangzhou, today Alibaba is larger than Amazon and eBay put together and is challenging some of the most powerful internet companies in the world…

Read more 


Important information

Investment risks

The value of an investment and any income from it can fall as well as rise and you may not get back the amount originally invested. Forecasts and past performance are not a guide to future performance. Some information and statistical data herein has been obtained from sources we believe to be reliable but in no way are warranted by us as to their accuracy or completeness. These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you of any change to our views.

Newsletter

News and expert analysis straight to your inbox

Sign up