The second phase of the Government’s Help to Buy scheme has been unveiled today (Tuesday, October 8), giving hope to thousands of first-time buyers and those with little equity in their homes. Hannah Bryan reports

FOR many young people nowadays, the dream of moving out of mum and dad’s and into your very own first home looked set to stay just that – a dream. But now, thanks to the Government’s new plans to offer 95 per cent mortgages to first-time buyers, the dream may become a reality.

More than 660,000 homes across the country – both old and new-builds - are eligible under the £12bn scheme, which will see 15 per cent of a property’s value guaranteed by a government loan, funded by the taxpayer, in return for a fee from the lender. It will allow homebuyers to buy a property with a deposit of just five per cent – equivalent to around £10,000 for eligible homes in most of England and Wales - as long as the property’s value is no more than £600,000.

The scheme had initially not been expected to start until the New Year, but was brought forward by three months, with estimates suggesting 180,000 loans could be taken out under the initiative.

Prime Minister David Cameron says he hopes the scheme will make the dream of home ownership a reality for many who would otherwise have been shut out.

“Too many hardworking people are finding it impossible to buy their own home - people who can afford the monthly mortgage payments but haven’t got rich parents and can’t pay the deposit up front,” he says. “Buying your first home is about far more than four walls to sleep at night. It’s somewhere to put down roots and raise a family. It’s an investment for the future.

“Above all, it’s a sign that everything you’ve put in has been worth it.”

Royal Bank of Scotland and NatWest today (Tuesday, October 8) announced they are offering two and five-year fixed rate deals at 4.99 per cent and 5.49 per cent respectively with no fee. The firm is expecting to sign up 25,500 first time and next-time buyers to the scheme over the next three years, and announced that 740 of its branches, including Darlington and Durham, would extend their opening hours for two weeks to cope with the expected demand.

From Friday, customers at Halifax will also be able to apply for a two-year fixed rate deal at 5.19 per cent, with a £995 product fee. HSBC said it would be taking part later in the year, while Virgin Money and Aldermore saying they would offer Help to Buy mortgages from January. Barclays and Santander UK are still considering whether to participate.

While the scheme is open to some existing homeowners, first-time buyers are expected to benefit most, like 22-year-old Anna Collins, from Middlesbrough. The public relations assistant and her partner of seven years, Adam Loughran, 24, have been saving for a deposit for their first home together for almost a year, but were worried they could not afford the ten per cent deposit needed for many existing mortgages.

“Adam and I have both been in full-time employment for a year now, so when the Government introduced the scheme we were extremely happy. We would have been saving for a lot longer if it wasn’t introduced,” she says, adding: “The young, working generation are the future of the economy and I think it’s important that we are able to get on the housing ladder and be able to have affordable homes on the market.” 

HOWEVER, while the deals already unveiled by RBS, NatWest and Halifax do undercut existing deals available to those with a five per cent deposit, experts have warned borrowers taking up the Government’s offer will still find the products more expensive than if they had saved up for longer to raise a bigger deposit.

Martin Lewis, founder of the consumer help website,, says there is a real worry people will rush to take up the deals just because they can, adding: “While these deals are cheaper than existing 95 per cent mortgages, they’re still very costly compared to normal mortgage rates.

“To those going for this scheme, do consider if you could push to a ten per cent deposit - doing that would hugely slice your monthly repayments.”

Despite concerns also being raised about the possibility of the scheme creating a price boom in a housing market where prices are already going up, Patrick Moseley of Smiths Gore chartered surveyors believes the North-East market will benefit from it.

“The vast majority of homes in the region are under £600,000, meaning that a significant amount of purchasers will be looking to buy homes that are eligible for the scheme,” he says. “While there is much talk of a London housing bubble, there is no sign of such a bubble in the North-East and any stimulus to get the market moving, particularly in the second-hand home market, is a welcome one.”