On 31 December, phase two of the Help to Buy initiative will be withdrawn from the market. Moneyfacts.co.uk looks back at the significance of the scheme and what effect it has had on high loan-to-value (LTV) mortgages.

Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, said:

“The 31st of December marks the end of a successful Government scheme to boost mortgage lending at the higher LTVs. Phase two acted as a starting gun for lenders to reintroduce mortgages at 95% LTV, bringing some normality back to the mortgage market.

“First-time buyers, regardless of if they used the scheme or not, have a lot to thank it for, as prior to the scheme borrowers would have struggled to find a deal that was not locals only or did not require a parent or guardian to guarantee the loan. And even if they did manage to find a suitable deal, the cost of the repayments would have been high. However, since the introduction of the scheme, the number of products has increased by 380% and the average two-year fixed rate has fallen below 4.00% for the first time on record.

“Despite the boost to the market, it was often the case that the Help to Buy deals on offer were more expensive than the standard deals available. For example, today the best overall five-year fixed rate stands at 3.97%, whereas a similar Help to Buy product is 0.31% more.

“Only time will tell what the true effect of the removal of such a pivotal scheme will be. However, the growth we have seen in the past is starting to slow, perhaps showing signs of what is to come for first-time buyers.”

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.

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