Help to Buy Mortgages – The Effects Of Rising Interest Rates
Rising interest rates is a topic frequently in the media, especially most recently due to the the unaffordable amount many young ‘Help To Buy’ homeowners are having to pay. Trainee Solicitor Connor Ball-Wood discusses what to do when selling or re-mortgaging your home if you have taken out a Help To Buy loan…
Rising Interest Rates
With interest rates rising for the 14th time consecutively to 5.25%, it is not just your usual homeowners that are being affected. Many young homeowners with Help to Buy Loans are being forced onto unmanageably high rates of up to 9% as recently reported by an article in This is Money.
Help to Buy loans were introduced in 2013. They offered buyers of new-build homes a loan of up to 20% of the property price. This initiative helped provide prospective first-time buyers with the opportunity to purchase their homes. It allows the buyers to purchase the property with a minimum 5% deposit. The Government then provides a 20% loan to contribute to the purchase. In London, this is 40%. The loan is interest free and lasts for five years.
After the five years, interest on the loan is payable and often this is the point at which people choose to pay off the loan. This can be done through the use of savings or by the selling the property and using the net proceeds of sale to repay the loan. For further information on how to redeem your Help To Buy loan you can visit How to repay your equity loan when you sell your home – GOV.UK (www.gov.uk).
When re-mortgaging, homeowners with a Help to Buy loan require a ‘Deed of Postponement’ which is issued by ‘My Help to Buy Loan’. Many people are experiencing problems with obtaining this form, subsequently preventing them from locking into a fixed mortgage rate meaning they are liable for much higher interest rates which, for some, is unaffordable.
Homeowners looking to sell are also experiencing problems due to the delays in obtaining the ‘redemption letter’. This is required when redeeming the loan. As part of the redemption process, homeowners need to obtain a valuation report from an RICS Surveyor. These are only valid for three months and many people are seeing these expire before the redemption letter is received.
How Can Timms Help?
The rising interest rates are causing significant concern to many households around the country. However, Timms can assist with re-mortgages and/or the redemption of your Help To Buy loan to help ease those concerns, although please keep in mind that the delays with ‘My Help to Buy’ may affect your transaction and are unfortunately outside of our control. If you think you may need help or advice with your Help To Buy Loan, please contact the Residential Conveyancing team on 01332 364436 or email us at legal@timms-law.com.
August 2023