Help To Buy Scheme: First Rates Are Revealed
The first mortgage rates on offer under the latest phase of the Government's Help to Buy scheme have been described by the lender as "fair and competitive."
The second phase of the controversial scheme - aimed at helping more people get on the property ladder - sees Help to Buy extended to cover old homes too instead of just new-build properties.
It will see 15% of a property's value guaranteed by taxpayers, in return for a fee from the lender, to help homebuyers obtain mortgages worth up to 95% of a property's value.
RBS and its Natwest subsidiary said they would be offering two and five-year fixed rate deals at 4.99% and 5.49% interest rates respectively with no fee. The brands expect a rush of interest - signing up 25,500 first and next time buyers over three years.
The banks confirmed 740 of their branches would extend opening hours for two weeks to cope with expected demand but Lloyd Cochrane - their head of mortgages - told Sky News there would be no reckless lending with potential customers facing tough affordability checks.
He said: "We ensure based on what they earn and what they spend that they can afford the mortgage now but really importantly we ensure they can afford the mortgage at a rate of 7% so that gives us and our customers the confidence that they can afford the mortgage into the long term."
Halifax - owned by Lloyds Banking Group - later confirmed its offering: A two-year fixed rate at 5.19% with a £995 product fee and said customers would be able to apply for the mortgages from Friday.
HSBC said it would be taking part later in the year, making it the first major player with no taxpayer support to sign up.
Virgin Money and the start-up Aldermore Bank will join from January while Barclays and Santander UK are still considering whether to participate.
The scheme had initially not been expected to start until the new year but was brought forward by three months.
It will offer £12bn in mortgage guarantees over three years and some estimates suggest 180,000 loans could be taken out under the initiative.
Lenders can start offering the mortgages from today, and they will be guaranteed by the Government from January 2014.
Prime Minister David Cameron said: "Help to Buy is going to make the dream of home ownership a reality for many who would otherwise have been shut out."
Chancellor George Osborne said: "Too many people are still being denied the dream of owning their own home, which is why we have brought forward the launch of this scheme, so as of today borrowers can start applying for a mortgage with a 5% deposit."
The new scheme means homebuyers will only have to find as little as 5% on homes worth up to £600,000. Depending on the size of the deposit, the Government will then guarantee up to 15% of the property value in return for a fee from the lender.
An earlier phase of the scheme, offering 20% loans on new-build properties, has already helped more than 15,000 people buy a new home since it was launched six months ago.
Help to Buy is controversial because critics fear it could fuel further rises in a housing market where prices are already going up.
But the Treasury said that while house price inflation stands at 3.3%, it is only 0.8% when the property hotspots of London and the South East are removed.
The latest report on the market from the Royal Institution of Chartered Surveyors (Rics) suggested prices were likely to surge further ahead in London and the South East because the supply of homes was lagging behind burgeoning demand.
It measured home sales at a four-year high last month but remaining historically low.
Commenting on the launch of phase two of Help to Buy, shadow chief secretary to the Treasury Chris Leslie said: "If ministers are serious about helping first-time buyers, they should bring forward investment to build more affordable homes.
"Rising demand for housing must be matched with rising supply, but under this Government house-building is at its lowest level since the 1920s."