Will Help to Buy live up to its name?

Government schemes like the first phase of Help to Buy have been widely credited with giving the property industry a much needed injection of life, but critics are sceptical whether the recently launched mortgage guarantee aspect of Help to Buy will lead to a boom.

Home buyers can obtain a loan for up to 20 per cent of the cost of a new build valued at no more than £600,000. The loan is interest free for the first five years, which means people only need a 5 per cent deposit and 75 per cent mortgage to make up the rest.

The launch of the mortgage guarantee aspect of Help to Buy was brought forward to the beginning of October, having originally been scheduled for January 2014. The government will guarantee 15 per cent of the bank’s loan for a fee to reduce potential losses for the banks.

There has been a mixed response from lenders. Royal Bank of Scotland, NatWest and Halifax – all government-backed organisations – signed up to the scheme prior to launch.Santander, HSBC, Barclays, OneSavings Bank, Aldermore and Virgin Media have all since committed to join the initiative between the end of the year and early 2014.

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