On average, those using the scheme are looking to buy homes worth £160,000, below the UK average house price of £247,000.
Cameron said: “The New Year is often a time when people look to make those big life-changing decisions like moving home or taking that first step on the housing ladder. But too many people have found themselves frozen out of the market in recent years as a result of the size of the deposit required.
“That is why as part of our long-term economic plan we introduced the Help to Buy scheme, so hardworking people with sufficient earnings can get on, fulfil their aspirations and enjoy the security of owning their own home.”
How the mortgage guarantee scheme works
Help to Buy is a two-part government scheme introduced in October 2013 to help both first-time buyers and homemovers who can’t afford to move from the property they are in.
Under this mortgage guarantee part of the scheme, buyers have to put down a deposit of at least 5% (you can find out more about how to go about raising a deposit here). The government then provides a guarantee to the lender for up to a further 15%, in return for a fee of up to 0.9% of the mortgage value to cover any potential taxpayer losses.
In the event that the buyer is unable to keep up with their repayments and the property has to be repossessed, lenders will only lose a maximum of 5%, with the Government covering the remainder.
Lenders can charge any interest rates they like, and the guarantee only lasts for seven years.
This part of the scheme applies to both existing homes and new-build properties up to a maximum value of £600,000. So far, Lloyds Banking Group, RBS, HSBC, Virgin Money and Aldermore offer mortgage guarantee Help to Buy mortgages, with Barclays and Santander due to introduce their products this month.
How the equity loan scheme works
Around 20,000 households have so far been supported by the Help to Buy Equity Loan scheme, according to the Downing Street figures.
Under this part of the scheme, buyers with a 5% deposit can apply for a government loan for up to 20% of the property price, bumping up their deposit to 25%. Buyers must then apply for a mortgage from a lender participating in the Help to Buy scheme to cover the rest of the property cost.
Buyers don’t pay any interest on the government loan for the first five years. After that they pay 1.75% of the loan amount. This figure rises annually in line with the retail price index measure of inflation, plus another 1%.
The loan can be repaid at any time, but each repayment must be a minimum of 10% of the home’s market value. The loan must be fully paid off by the time the mortgage ends or when the property is sold.
You can find out more about how both elements of the Help to Buy scheme work here.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct