24Feb

The part of the Help to Buy scheme designed to help first-time buyers with only a 5% deposit to put down has now finished, but there are still deals available to help people with smaller deposits.

 

The mortgage guarantee element of Help to Buy was originally set up to boost 95% lending. As its name suggests, the scheme provided a government guarantee to lenders prepared to lend up to 95% of the property value.

 

The guarantee meant that the government would compensate lenders, to help reduce their risk.

 

The scheme proved successful, encouraging more lenders to offer mortgages to those with only a 5% deposit to put down. Some lenders introduced 95% mortgages even without the guarantee.

 

The impact for first-time buyers has therefore been positive, and has given them access to a much wider choice of 95% deals, with some major lenders maintaining the rates they offer even now the scheme has ended.

 

Average rates on 95% deals have also fallen, although buyers must meet affordability criteria to qualify.

 

Those who manage to save larger deposits will have far more mortgage options available to them, but broadly it is a healthier market for homebuyers, whatever size deposit they have.

24Feb

Halifax, one of Britain’s biggest lenders, has recently relaxed the criteria borrowers are required to meet if they want an interest-only mortgage.

With this type of mortgage, as the name suggests, you only repay the interest on the amount you’ve borrowed each month. The capital must be repaid when the mortgage term ends.

Homeowners used to need a minimum £1million pension pot to be eligible for an interest-only mortgage with Halifax.

Now they only need to prove they have a pension which will reach £400,000 by the time they retire.

They can also sell their home as a means of paying back what they owe. To be eligible, however, homeowners must have an income of £100,000 or more, or £150,000 if applying as a couple. They must also have at least £200,000 equity in the property.

Interest-only deals were very popular prior to the credit crunch, but lenders have since made it harder to qualify for this type of loan.

Most lenders do still offer interest-only mortgages, but may impose eligibility requirements. For example, Virgin Money will lend on an interest-only basis to borrowers with a joint income of £50,000, while NatWest requires a minimum income of £100,000.

Changes such as those made by Halifax show that lenders are re-assessing their approach to interest-only, although borrowers will still need to demonstrate a repayment plan to ensure it’s appropriate.