The second phase of the government’s Help to Buy scheme has been put under scrutiny today as banks try to offer better deals to borrowers outside of the scheme.
Today Clydesdale Bank and Yorkshire Bank have cut their rates for first-time buyers with a 5% deposit, beating deals offered as part of the Help to Buy scheme. The banks reduced their rates on three year fixed rate mortgages from 5.49% to 4.99%. These rates match those offered by Natwest, who are part of the government scheme, but they are fixed for three years instead of two.
Some commentators have said that this could be embarrassing for the government, after they brought the scheme forward from its initial planned January launch. However, prime minister David Cameron defended the scheme, saying that it was giving the right to buy to young Britons whose parents can’t afford to give them a deposit.
Santander today became the latest bank to announce it was joining the scheme, but so far only Halifax and RBS have revealed their rates.
Critics of the scheme say that it exposes taxpayers to property market losses - since the government is offering guarantees on up to 15% of every mortgage - and could create an artificial property price bubble. Another criticism comes today from East Lancashire MP Graham Jones, who warns that the North will not benefit equally from the scheme, and that the taxes of his constituents shouldn’t be used to subsidise someone else’s “London townhouse”.
David Hollingworth of London & Country Mortgages commented on the rates offered by Clydesdale and Yorkshire:
“The rate offered by Clydesdale and Yorkshire is definitely a good deal. Although it's limited to first-time buyers only, there's no question that this is a leading rate. Not only does it match the rate offered by NatWest/RBS, it is fixed for three years rather than two, and it offers freebies like cashback and free standard valuation.
“Borrowers won't care that these mortgages aren't backed by the Help to Buy scheme, they'll look at the rate alone and know that Clydesdale and Yorkshire are offering a better deal.”
He went on to add that the Help to Buy scheme did appear to be benefitting consumers by increasing competition in the area, as lenders battle to win over newly optimistic first-time buyers.