Help To Buy Scheme Could Secure 180,000 Loans

Banks are expecting a flood of interest as the latest phase of the Government's Help to Buy scheme is launched.

The move will help homebuyers obtain mortgages worth up to 95% of property values.

And in the latest phase of the controversial scheme 15% of a property's value will be guaranteed by taxpayers, in return for a fee from the lender.

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."

Virgin Money is among the lenders taking part

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.

Taxpayer-backed Royal Bank of Scotland and its subsidiary NatWest immediately set out mortgage deals under the scheme and announced that 740 of its branches would extend opening hours for two weeks to cope with expected demand.

Halifax and Bank of Scotland, owned by the state-backed Lloyds Banking Group, will start offering loans under the scheme on Friday, but the Lloyds brand itself is not taking part.

The Treasury also announced that Virgin Money had signed up, while the start-up Aldermore Bank has also said it will join.

Both will take part from January and Aldermore is exploring whether the date can be brought forward.

A Treasury spokesman said the lenders involved so far represented more than 30% of the mortgage market and that more lenders were expected to indicate participation in the coming months.

The scheme had initially not been expected to start until the new year but has been 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.

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.

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