UK Government-backed banks begin 95% mortgage scheme
on 08/10/2013 10:47:51
The new phase of the controversial Help to Buy scheme will see up to 15% of a property's value guaranteed by taxpayers, in return for a fee from the lender.
Taxpayer-backed Royal Bank of Scotland and its subsidiary NatWest immediately set out mortgage deals under the scheme and announced that 740 of its branches would extend opening hours for two weeks to cope with expected demand.
Halifax and Bank of Scotland, owned by the state-backed Lloyds Banking Group, will start offering loans under the scheme on Friday but the Lloyds brand itself is not taking part.
The Treasury also announced that Virgin Money had signed up while the start-up Aldermore Bank has also said it will join. Both will take part from January and Aldermore is exploring whether the date can be brought forward.
HSBC provided a major boost to the scheme when it confirmed that it would begin offering mortgages worth up to 95% of property value, as the first bank outside of state support to do so.
Several other major mortgage providers still want to know further details about the costs and benefits of the scheme before deciding whether to add their names to the list.
A Treasury spokesman said the lenders involved so far represented more than 30% of the mortgage market and that more lenders were expected to indicate participation in the coming months.
The scheme had initially not been expected to start until the new year but has been brought forward by three months.
It will offer £12 billion in mortgage guarantees over three years and some estimates suggest 180,000 loans could be taken out under the initiative.
The new scheme will mean they only have to find as little as 5%, on homes worth up to £600,000. Depending on the size of the deposit, the Government will then guarantee up to 15% of the property value in return for a fee from the lender.
Lenders can start offering the mortgages from today, and they will be guaranteed by the Government from January 2014.