Huge confusion among consumers over Help to Buy

There is massive confusion among consumers over the next phase of the Help to Buy scheme, says a lenders’ trade body.

Research from the Building Societies Association (BSA) found 31% did not understand whether there is a difference between a standard 95% mortgage and an equivalent loan made using the Help to Buy mortgage indemnity scheme.

Many thought buyers are more likely to be approved for a Help to Buy mortgage than other types of mortgages.

Almost one in five (18%) first-time buyers thought the scheme would allow them to borrow more than they could otherwise do, while 12% of home movers believed taking a Help to Buy mortgage would result in lower monthly payments.

Other common misunderstandings are that first-time buyers think Help to Buy would protect them if they fall behind with monthly payments, and from house price falls.

Paul Broadhead, head of mortgage policy at the BSA, said: “It is unsurprising that some consumers are finding the Help to Buy mortgage guarantee scheme difficult to get their heads round. The situation has been complicated by the launch of two very different schemes both called Help to Buy.

“It is essential that providers offering loans under the scheme leave applicants in no doubt about the terms of their mortgage loan. I am particularly concerned that a reasonable minority of active first-time buyers believe that they can borrow more than normal and that they are in some way protected. Neither assumption is true.

“In fact a 95% mortgage through Help to Buy mortgage guarantee is exactly the same as a standard 95% mortgage. It is vital that these myths are dispelled at application to prevent the possibility of consumers misunderstanding their mortgage loan and later feeling misled.”

Mortgages are already being written under the next phase of Help to Buy, but purchases cannot be completed until the mortgage guarantee is in place in the early New Year.