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Shop outside of Help to Buy for the best 95% mortgages

Help to Buy has done more than provide a guarantee, it has driven down 95% rates outside of the scheme.


by Michelle McGagh on Nov 11, 2013 at 14:18

Shop outside of Help to Buy for the best 95% mortgages

Lenders may have been slow to join the Help to Buy scheme but this doesn’t mean borrowers looking for 95% loan-to-value (LTV) mortgages are limited to a handful of banks.

Following the financial crisis lenders, some of which had had their fingers burnt by 100% mortgages, were reluctant to provide mortgages to borrowers without a substantial chunk of money to put down.

The aim of the second part of the Help to Buy scheme, which sees the government guarantee part of the mortgage for people with a 5% deposit, was to make borrowing more affordable and widespread for those with small deposits.

The second part of the scheme, which chancellor George Osborne brought forward from January, has been successful in its aim of widening the number of 95% mortgages available and increasing lending.

So far, just Lloyds and Royal Bank of Scotland – both of which are part taxpayer-owned – have signed up to Help to Buy although Santander, Barclays, HSBC and Virgin Money have said they will sign up.

RBS and its subsidiary Natwest, and Lloyds-owned Halifax have confirmed that in the first month of the guarantee scheme they have already had 2,384 applications worth up to £365 million in mortgages.

RBS alone has approved 169 of its 1,075 applications and five borrowers had already completed on their new homes. The average price of a property was £167,565.

Look outside Help to Buy

Despite this flurry of activity in the first month, it is neither Lloyds nor RBS which is offering the best rate on a 95% mortgage. That honour goes to the smaller building societies, which make up the top four 95% fixed rates.

Charlotte Nelson of comparison site said the second part of the Help to Buy scheme had widened the number of 95% mortgages available from 42 in October to 62 at the beginning of this month.

‘Since the launch of the Help to Buy scheme a month age there is now a wider choice for borrowers with a small deposit even outside of this government backed scheme,’ she said.

‘However, borrowers are wise to shop around as they may find a better deal outside the scheme with many providers throwing down the gauntlet by not only offering a competitive rate but a great all round package which can help lower the overall cost of the mortgage.’

Best rates available

Furness Building Society is offering a 4.75% fix for five years, with no fees. A branch interview is however required and as branches are only located in the North West of England it may not be practical for borrowers from further afield.

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