The 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