Stage 2 Help To Buy Launches This Week

We can report this month that there seems a significant degree of activity in the mortgage and finance market as the political party conferences get well under way.

The recent announcement last weekend, that Stage 2 of the Help to Buy Scheme providing State subsidised mortgages by some of the State subsidised banks remains controversial. Whilst  no doubt being a welcome vote winner, there are many commentating that in the longer term, it could prove highly damaging with fears it could spark a further housing bubble, which caused the initial crash.

There are indications that the recent Bank of England freeze on rates is already being revised with predictions, that rates will increase sooner rather than later as economic growth and recovery showing increased signs of improvement.

David Cameron has revealed, that the state-backed lenders, Royal Bank of Scotland and Lloyds Banking Group, have signed up to the scheme and the launch date has been brought forward from January. Banks accounting for about a third of the mortgage market will start offering taxpayer-subsidised mortgages in just over a week after the Government brought forward the launch date of its controversial Help to Buy scheme by three months.

Help-to-Buy will initially be available under the NatWest, RBS and Halifax brands but a Tory spokesman said that other banks are expected to take part over time.

The scheme will help people buy any home worth up to £600,000 with just a 5 per cent deposit allowing for 95% mortgages. A smaller government loan scheme for people buying newly built properties began in April. Under the new scheme, the Government will guarantee the next 15 per cent of the loan for a fee, reducing the banks' potential losses so they can offer cheaper mortgages to higher-risk customers who are currently locked out of the market.

The deal will be available for £12bn of guarantees on up to £130bn of mortgages and remain open for three years. Critics have warned that the guarantees could inflate a dangerous housing bubble at a time when the property market is already showing signs of recovery. Vince Cable, the Business Secretary, has questioned "whether it should come into effect in light of the changing market conditions", adding: "We don't want a new bubble."