Lenders have been accused of “penalising” buyers who have been led to believe they could finally get a competitive mortgage through the government’s Help to Buy 2 scheme.
Brendan Cox, managing director of Waterford’s estate agents, has criticised lenders for capitalising on buyers who have been led to believe that help is finally at hand, only to be penalised by rip-off interest rates.
RBS/NatWest became the first to reveal pricing of its Help to Buy mortgages, offering a two-year fixed rate deal at 4.99% with no fees. Halifax has since followed with a two-year fixed rate at 5.19% plus a £999 fee.
Cox said the fees are ridiculous and make a mockery of the whole scheme. “There has been a hugely positive reaction to Help to Buy in the weeks leading up to its launch, which has got many people excited at the prospect of making a move.
“However, in what I believe puts the Government in a very embarrassing position, people are being told they can buy through the scheme, but will have to pay nearly twice the interest rates of anyone else.”
Lenders are now offering better rates and fees on 95% mortgages outside of the scheme, he said. “It is scandalous and one of two things will happen. The scheme, which has been largely publicised, will fall flat and never actually get off the ground, or, people will go with it, because they have no other option, and later find they cannot afford the repayments, which will result in a substantial rise in repossessions.
“We are supposed to be helping buyers not setting them up to fail and I can see no logical reason as to why lenders are imposing such high rates when there is no greater risk to them.
“I would call on all those lenders within the scheme to explain the reasoning behind their rates, so that buyers can understand exactly why they are paying such a high price.”
Yet the disappointing rates don’t appear to have dented the enthusiasm of potential buyers, with RBS reporting 10,000 enquiries in the first four days, double the number it would usually expect.
It has also arranged 5,000 appointments with its mortgage advisers
The scheme was launched early and most lenders did not have a proposition prepared. Our advice to would be buyers is not to rush in and definitely don’t go direct to the banks. A fresh supply of first time buyers is the perfect recipe for them to rip you off. Over the next couple of months, more lenders should come on board and the competition this creates should lead to more competitive rates. The banks are simply allowing the government to add a guarantee to the already (comparatively) expensive high loan to value mortgages. Remember most of them are in business to provide a profit for their shareholders not you!