Help to Buy 2 deposits shrink

Robyn Hall

July 31, 2014

Having stood at 92.5% in April, the average LTV on Help to Buy 2 mortgages rose to 94.4% in June.

The data, which was compiled from over 550 brokers and 900 estate agents, showed that deposits have fallen by £2,911 from £11,438 in April to £8,527 in June.

Brian Murphy, head of lending at Mortgage Advice Bureau, said: “The volume of buyers using Help to Buy 2 may be small, but the scheme is continuing to play an important role in boosting access to the housing market in a carefully screened manner.

“Buying with a 5% deposit remains the only realistic option for many would-be first time buyers – especially those who cannot rely on parental handouts.

“With the right checks and balances in place, this kind of activity is an important part of a healthy mortgage market that can satisfy consumer needs without compromising on standards.”

Property prices using the scheme remain stable at around £151,000, suggesting buying ambitions remain in check.

Murphy added: “Affordability checks and income stress tests will protect against excess loan commitments and make sure borrowers are financially fixed to manage their repayments.

“The fact that the value of homes bought through HTB2 is safely anchored around the £151,000 mark means that putting up less of a deposit makes relatively little difference to the total amount borrowed.

“Although it means repaying a larger sum overall, many will consider this a price worth paying for the benefit of getting their foot on the ladder.”

Lower deposits means the average loan via the scheme has risen by 2% (£3,175) from £139,583 in April to £142,758 in June. With a 5% interest rate over a 25-year term the average June buyer would repay an extra £18.77 per month towards their mortgage and an additional £5,631 over the lifetime of the loan.

Across the whole market average deposits stand at £71,474, having risen by £6,324 from April to June.

June’s average LTV stands at 69.8%, the lowest since October 2013 and the first time the figure has dropped below 70% in 2014.

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