HSBC next to unveil Help to Buy mortgage deals

HSBC has become the latest lender to unveil details of its Help to Buy mortgages, designed to help first-time buyers get onto the property ladder as well as homemovers struggling to take their next step up.

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The mortgages fall under the mortgage guarantee part of the scheme, launched last month, whereby buyers need to put down a minimum 5% deposit, but the Government then provides a guarantee to the lender for up to a further 15%.

This means that if the property ends up having to be repossessed, lenders will only face losses of 5%, with the Government paying them back them the remainder.

The guarantee only lasts for seven years, and lenders can charge any interest rates they like. In return for the guarantee, lenders have to pay the government a fee of up to 0.9% of the value of the mortgage to cover any possible taxpayer losses if borrowers default on their repayments.

HSBC’s offering

HSBC has launched two fixed rate Help to Buy mortgages. The first is a two-year fixed rate deal at 4.79%, and comes with a £99 booking fee. The second deal is a 4.99% five-year fix, again with a £99 booking fee. Both deals are available to borrowers with just a 5% deposit to put down.

Brendan Cook, head of retail banking and wealth management for HSBC UK said:  “We want to support our customers, whether they are buying their first home or moving up the housing ladder. In order to protect them, we want to ensure they can afford their repayments when interest rates rise.”

However, regardless of the value of the property they are buying, borrowers choosing one of these mortgages will be required to put down a minimum deposit of £10,000. HSBC says this is to safeguard customers in the event of future house price fluctuations.

Importantly, HSBC’s new mortgages currently only available to those looking to purchase a property, and not people looking to remortgage, so won’t help existing homeowners. The bank said it will look at offering these loans to remortgage customers at a later date.

HSBC's 5% deposit mortgages are NOT available fo new-build properties. They are also only available from HSBC direct, and not through brokers.

Alternative Help to Buy deals

Other banks which have committed offering 95% deals under the mortgage guarantee element of Help to Buy are RBS/NatWest, Halifax, Woolwich, Santander and Leeds, Cumberland, Teachers, Dudley, Newbury and Chorley building societies.

Other banks which have committed offering 95% deals under the mortgage guarantee element of Help to Buy are RBS/NatWest, Halifax, Woolwich, Santander and Leeds, Cumberland, Teachers, Dudley, Newbury and Chorley building societies.

However, until today, only RBS/NatWest and Halifax have actually produced the rates they will offer under this scheme.  RBS/NatWest are offering a two-year fixed rate at 4.99%, with no fee, while Halifax is offering a two-year fixed rate deal at 5.19% with a £995 fee.

David Hollingworth, of mortgage broker London & Country Mortgages said; “With other major lenders already signed up to participate in the second part of Help to Buy it looks like the 95% market will only open more and increased competition should only be a good thing for first time buyers and homemovers.  Borrowers will need to be able to tick all the boxes though and better product availability does not equate to a relaxation in criteria.”

How the deals stack up

Although the Help to Buy rates announced so far are competitive, there are other low-rate mainstream deals available to those with a 5% deposit to put down – in other words, outside the Help to Buy scheme.

For example, Yorkshire Building Society yesterday launched a range of 95% deals for house purchase purposes (though you don’t have to be a first-time buyer). And these deals will extend to remortgagers from early 2014.

The deals include a market-leading 4.59% two-year fixed rate offered through Yorkshire’s subsidiary brand, the Chelsea Building Society. This deal has a £1,545 arrangement fee but there is a two-year fee free fixed rate available at 4.89% with no fee at all – and £500 cashback thrown in. You can read more about these deals here.

Learn more about Help to Buy and see what 95% mortgage deals are on offer.

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