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Help to Buy Mortgage Guarantee Causing Confusion

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First Time Buyers  Paul Broadhead  Building Societies Association  Help to Buy  mortgage policy  Mortgage Market Review 

Help to Buy Mortgage Guarantee Causing Confusion

By - Monday 11 November 2013

The mortgage guarantee component of the Help to Buy scheme is causing confusion among first-time buyers, according to new research. A consumer survey by the Building Societies Association (BSA) revealed 43 per cent of those new to the property market and other home movers are unsure of the benefits the scheme will give them. What's more, 31 per cent of those looking to buy or move don't know if there is a difference between a 95 per cent mortgage offered by a lender that has signed up to Help to Buy and one that hasn't.

Paul Broadhead, BSA head of mortgage policy, said: "It is unsurprising that some consumers are finding the Help to Buy: Mortgage Guarantee Scheme difficult to get their heads round.  The situation has been complicated by the launch of two very different schemes both called Help to Buy. It is essential that providers offering loans under the scheme leave applicants in no doubt about the terms of their mortgage loan."

The research found 18 per cent of first-time buyers and 17 per cent of home movers believe they can borrow more through the scheme than with a standard 95 per cent loan. Twelve per cent also wrongly believe their repayments will be lower by using Help to Buy's mortgage guarantee, while one in ten think the scheme will protect them if they are unable to keep up with monthly repayments. Indeed, 12 per cent of first-time buyers think the guarantee will protect them if their house price falls. Meanwhile, 24 per cent of those trying to get onto the property ladder and 22 per cent of home movers think they are more likely to be approved for a Help to Buy mortgage.

BSA is stressing that not one of these beliefs is true. In actual fact, the Help to Buy mortgage guarantee scheme is there is encourage lenders to lend to borrowers with small deposits to increase the availability of loans. The scheme is subject to the same rules as normal lending and until the FCA's rules related to the Mortgage Market Review take effect in April 2014, buyers may be subject to even stricter requirements under Help to Buy.

More detail on the financial farce that is Help to Buy

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