The government’s flagship Help to Buy mortgage guarantee scheme, which aims to help homebuyers with small deposits get on the property ladder, comes to an end today, but Which? analysis finds there are still plenty of mortgages available to people with lower savings.
As of the final week in December, Which? analysis of Moneyfacts data found there were 490 mortgages for borrowers with a 15% deposit, 479 mortgages for those with a 10% deposit and 257 for those with a 5% deposit.
And just 4% of these were ‘Help to Buy’ Mortgages, meaning that despite the end of the scheme, there are still lots of ways for people to buy a home.
More mortgages available since Help to Buy launched
The Help to Buy mortgage guarantee scheme was launched in 2013 and aimed to increase the availability of high loan to value mortgages, as well as making them cheaper for borrowers.
Mortgage lenders that participated in the scheme were able to get government-backed guarantees on every high loan-to-value (LTV) mortgage they offered to people with small deposits. This meant banks and building societies were more likely to offer these types of mortgage, and potentially at better interest rates, as they would be compensated if borrowers defaulted on their payments.
The availability of high LTV mortgages has increased significantly since 2013. For example there were just 97 95% mortgages in October 2013 compared to 257 at the end of December 2016.
The average interest rate on 95% mortgages has also significantly decreased from 5.05% in October 2013 to 4.07% in December 2016.
Lenders continuing to offer 95% mortgages
HSBC announced last month that it would no longer be offering 95% mortgages following the closure of the Help to Buy mortgage guarantee scheme.
However, so far it appears to be the only major high street lender that has taken this step and other lenders still continue to offer them.
Other help for first time buyers
There are still other options available if you’re a first time buyer and think you would struggle to get a mortgage.
Help to Buy equity loans
The first part of the Help to Buy scheme, Help to Buy equity loans , is still available, as explained in the video above.
With a Help to Buy equity loan the government will lend you up to 20% of a property’s value. You will need to put down a deposit of at least 5% and get a mortgage to cover at least 75% of the property’s value. Help to Buy equity loans are only available for newbuild properties.
You may also want to consider Shared ownership. If you can’t afford to buy a property outright, shared ownership allows you to buy a share of a home and rent the rest.
Shared ownership properties are sold through housing associations. You buy a stake of between 25% and 75% of the property, using a deposit and a mortgage.
You then pay rent on the remaining share, which is owned by the local housing association. The rent you pay can be up to 3% of the association’s share of the property’s value.
Family members may also be able to help you onto the property ladder using a guarantor mortgage.