Mortgage guarantee scheme launches early

Prior to the Autumn Statement, Prime Minister David Cameron announced that part of the Government’s flagship Help to Buy initiative would be launched three months earlier than was originally planned.

The Help to Buy mortgage guarantee scheme was due to start in January 2014 but applications for mortgages under the scheme were brought forward to the week commencing 7 October. To be able to offer the guarantees ahead of schedule, the Government is allowing lenders to start writing loans that will become part of the scheme when it opens in January.

Several high street banks will be offering the new Help to Buy mortgages to customers. Under the scheme, buyers need a 5% deposit and the Government and the bank will then jointly guarantee up to the next 15% of the property’s value, in return for a fee paid for by the lender.

Help to Buy will be available for three years up to January 2017.

Under the first phase of the scheme, which was launched in April, the Government provides homebuyers in England with equity loans of up to 20% of the price of a new property. The loans are available for newly built homes worth up to £600,000. However, buyers are required to contribute at least 5% of the property price as a deposit, with a 75% mortgage to cover the remainder.