Under new changes by the government, buyers who used the Help to Buy scheme to purchase a new home will now benefit from improved borrowing flexibility.
For the first time, homeowners taking advantage of Help to Buy will be permitted to take out a mortgage over a 35-year term; the change has been introduced with immediate effect.
Previously, a loophole meant that after two or five years at the end of a fixed rate period, when remortgaging, in practice Help to Buy homeowners could not take out a mortgage beyond 25 years after the original property purchase date.
The change has been implemented with the intention of giving Help to Buy purchasers more freedom about reducing their monthly mortgage repayments by borrowing over a longer term.
More competitive deals for Help to Buy applicants
Mortgage lenders are likely to offer a greater choice of competitive deals within this sector of the market. The wider mortgage market has seen the volume of mortgages for more than 30 years being taken up by over 50% more first-time buyers in the last 10 years.
Will German, director of Help to Buy at Homes England, said: “Under our new policy, if the customer’s remortgage runs for longer than the standard 25-year Help to Buy Equity Loan term, then we will automatically extend ours.
“This move opens up the Help to Buy remortgage market to more lenders. It offers more choice, more options and better outcomes for these customers.”
He added: “Lenders have been in touch to say that the agreement to match or extend our equity loan to the main mortgage loan term was critical to giving them the confidence to offer re-mortgage products to Help to Buy customers.”
Freedom and flexibility
Trade Association UK Finance worked alongside Homes England on developing this new policy. Jackie Bennett, director of Mortgages at UK Finance, said: “This is a great example of public and private sector engagement and we look forward to continuing to work closely with Homes England in the months ahead.
“The new changes provide certainty for lenders and should also attract new entrants to the market, providing greater choice for customers who are looking to remortgage under the Help to Buy scheme.”
Housing Minister Esther McVey said: “I want our Help to Buy scheme to work for homeowners so we are giving people the freedom and flexibility to take out longer mortgages, if it suits their needs.
“We are determined to open up the dream of homeownership to the next generation and our Help to Buy schemes have already been used more than 500,000 times by families to get a leg up onto the property ladder.”