January 17 – New Year, new beginnings?
The New Year has brought in a few changes to the mortgage market, including the Prudential Regulation Authority underwriting requirements on buy to let contracts and the end of the Help to Buy mortgage guarantee scheme. As a result we have seen some lenders increase their interest coverage ratio to higher than the minimum prescribed by the PRA. The withdrawal of the government guarantee however seems to have had less impact with some lenders continuing to offer their high loan-to-value products and others still introducing new ones.
In the rest of the Help to Buy range we still have the ISA, equity loan and shared ownership schemes. Although the Lifetime ISA will launch in April this year to encourage savers either purchasing their first home or when retiring, the Help to Buy ISA will continue to be open for new savers until 2019 and new contributions until 2029. While brokers aren’t expected to provide tax or savings advice, understanding how the two ISAs work together will be hugely beneficial for first time buyers. For example the government has clarified that its 25% bonus for the Help to Buy ISA will be paid between exchange and completion. So even if a customer only opens one at the beginning of the purchase process, when they were made aware by their broker, they would be able to use the bonus towards the deposit.
Last year the government reported a lower than expected take up of Help to Buy ISAs. Although the industry will learn to use LISA in the future, we need to ensure we help our customers use current opportunities as well.
Senior Policy Adviser