Here we take a closer look at Lloyds’ new deals, explain how the Help to Buy mortgage guarantee scheme works, and examine the other rates on offer….
Who’s eligible for Help to Buy?
The mortgage guarantee part of the Help to Buy scheme, launched in October 2014, is available to buyers with a 5% deposit. The government then offers a guarantee to the lender for up to an additional 15% so that, in the event the buyer defaults on their repayment, the lender will only lose a maximum of 5%.
Lenders can charge whatever interest rate they like, and must pay the government a fee of up to 0.9% of the full value of the mortgage to cover possible taxpayer losses that might arise if buyers aren’t able to keep up with their repayments.
What Lloyds is offering
Lloyds’ new Help to Buy mortgages are available from 3 January to both those looking to purchase a property, and people looking to remortgage and move home.
The bank is offering a two-year fixed rate of 5.19% with a £995 fee for homebuyers with a Lloyds Bank current account, or a two-year fixed rate of 5.39% with the same fee for those without a current account.
Lloyds is also offering two fee-free two-year fixed rate deals at the higher rates of 5.59% for those with a Lloyds Bank current account and 5.79% for those without one. Halifax, part of the Lloyds Group, already offers a two-year fixed rate deal at 5.19% with a £995 fee.
David Hollingworth, of London & Country mortgage brokers, said; “The Lloyds Group has offered Help to Buy mortgage guarantee rates since its launch last year, but through the Halifax brand. It’s little surprise that Lloyds’ rates mirror those on offer from Halifax to a large degree. In fact, unlike Lloyds, Halifax does not require the borrower to have a current account with the bank in order to benefit from the lower rates of 5.19% or 5.59% depending on the fee.
“So, although it broadens the availability of Help to Buy rates to the Lloyds network, it does not really bring anything new to the existing Halifax products.”
How other Help to Buy deals compare
The other lenders participating in the mortgage guarantee scheme are RBS, Barclays, Santander, Virgin Money and Aldermore, with only Barclays and Santander yet to reveal details of the mortgages they will offer. Both are expected to announce their deals this month.
Several of the deals currently on offer beat Lloyd’s deals hands-down. For example, HSBC’s two-year fixed rate deal stands at just 4.79%, and comes with a £99 booking fee. HSBC also offers a 4.99% five year fixed rate mortgage, again with a £99 booking fee, and both these deals are available to buyers with a 5% deposit to put down.
RBS and NatWest, meanwhile, are both offering a two-year fixed rate Help to Buy deal at 4.99%, with no fee, for buyers with a 5% deposit.
Aldermore Building Society launched its two-fixed rate mortgages under the Help to Buy mortgage guarantee scheme just before Christmas. These are a two-year deal at 4.98% for those with a 10% deposit to put down, and another two-year deal at 5.28% for those with a 5% deposit. Both these deals have a £999 fee.
Virgin, however, offers a marginally higher two-year fixed rate of 5.29% for those with a 5% deposit but its deal has no fee, making it a more competitive option than the Aldermore deal. It also offers buyers with a 5% deposit the choice of a three year fix at 5.39% or a five-year fix at 5.49%.
For those with a deposit of 10% to put down, Virgin offers a fee-free, two year fix at 4.29%, or a three-year or five-year fix at 4.69% and 4.89% respectively. Anyone taking out a Virgin Help to Buy mortgage to buy a home also benefits from £300 cashback as a contribution towards legal fees, valuation fees or the general cost of moving.
Help to Buy – not the only option
A few lenders offer competitive low-rate mainstream deals outside the Help to Buy scheme to homebuyers with a 5% deposit to put down, so it’s always worth investigating what else is on offer.
For example, Norwich & Peterborough Building Society currently offers a rate of 4.69% for those needing to borrow up to 95% of the property value, with a £845 fee. The building society also offers a higher rate of 4.89% with no fee, a free valuation and £500 cashback.
Whichever mortgage you go for, remember to factor in all the other costs associated with moving too, such as stamp duty and the survey, legal and valuation fees, as these will all add substantially to the overall cost of buying your home.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