HSBC has announced its support for the government’s Help to Buy plan citing that it will start providing mortgages covering 95% of a property’s value as specified in the scheme.
The announcement comes as a huge boost for the government following an extended period of criticism about the potential impact the scheme could have on the market.
So far only the RBS group and Lloyds have publically stated their commitment to the scheme and HSBC’s statement see’s them become the first major foreign bank to announce their support for the program.
Help to Buy was first announced earlier this year and contains a two pronged approach to restore consumer confidence in the property market.
The Equity Loan scheme allows new buyers to borrow up to 20% of a new build home, interest free for 5 years. They will then be required to pay a 5% deposit in to obtain the house and will still need to find a mortgage provider to cover the other 75% of the property costs.
The Mortgage Guarantee Scheme will allow property buyers to only pay a 5% deposit on any property up to the value of £600,000. You will then be able to receive a mortgage from providers onside with the scheme of up to 95% of the property’s total value.
Furthermore, the government will then guarantee the mortgages for anyone who is borrowing over 80% of the house value in case they fall into tough financial times. This is to allay any fears lenders might have about lending out larger mortgages to people.
It has been speculated that over 175,000 new loans applications could be sparked as a result of the new scheme.
Estate agent Haart has also stated that they believe property transactions would rise by at least 10% in the next year due to the government planned scheme. Statistics from their studies have outlined that the average deposit for first time buyers across the UK is set to drop monumentally from £33,948 to a low £7,218.
The figures come after a period of intense scrutiny about the potential impact the scheme could have on the property market.
Many commentators have raised genuine concerns about the artificial inflation the scheme could cause with house prices as fears grow about a future ‘house bubble’.
However HSBC’s announcement provides a huge boost to the scheme that was in dire need of reinforcement for banks outside of RBS and Lloyds.
The business bank stated that intend to begin offering Help to Buy scheme of 90-95% property value later on this year.
Antonio Simoes, head of HSBC UK, has released a statement highlighting the banks desire to beat or match rates from competitors on 90% mortgages.
“By participating in Help to Buy, we will go further and offer mortgages up to 95% LTV,” he stated.
NatWest and others in the RBS group are currently providing two and five year fixed rate mortgages at 5.49% and 4.99% respectively. The rates are extremely competitive and are set to attract over 20,000 new buyers in the next three years.
The competitiveness of the rates currently on offer mean that NatWest have been forced to lengthen their opening times at multiple branches across the country as demand continues to increase.
Lloyds affiliate Halifax will start offering help to buy mortgages from Friday with a 5.19% fixed rate starting offer announced.