The Skipton Building Society is launching a new range of what it has dubbed ‘Hexit’ products which can be considered by those looking to leave their Help to Buy mortgage.
The new range, which consists of two, three and five-year fixed remortgage products, offers £1,000 cashback to help Help to Buy customers with the increased legal and administrative costs typically incurred when repaying the government equity loan. The products could be considered to help borrowers ‘staircase out’ of Help to Buy by increasing their borrowing to repay the equity loan – before interest payments begin to be charged, the Skipton said.
As Help to Buy: Shared Equity customers approach the fifth anniversary of the scheme and interest payments on the equity loan begin to kick in, many homeowners will be asking if the time is right to pay off their equity loan and take the opportunity to increase their mortgage borrowing to buy their home outright.
The first phase of the Help to Buy: Shared Equity scheme in England began in April 2013 with the government offering a 20% equity loan deposit contribution to buyers of newly-built properties who were able to provide their own 5% deposit. Under the scheme rules, the equity loan due to be repaid increases or decreases in line with house price movement, a factor many help to buy customers may well be considering following average house price growth of 25.5% since the inception of the scheme. Whilst all equity loans have remained interest-free for the first five years, the approaching fifth anniversary of the scheme will see an interest fee of 1.75% of the amount of the equity loan charged monthly, rising annually by any increase in the Retail Price Index plus 1%.
Skipton’s new ‘Hexit’ range offers remortgage products at 75%, 85% and 90% LTV across two, three and five-year terms. The products, which are all fee free and include free upfront valuations, include two-year fixes at 2.75% to 90% LTV and 2.49% to 85% LTV, three-year fixes at 2.85% to 90% LTV and 2.54% to 85% LTV, and five-year fixes at 2.99% to 90% LTV and 2.64% to 85% LTV.
The new range is available to all homeowners wishing to remortgage, not just those presently on Help to Buy mortgage deals.
Kris Brewster, the Skipton’s head of products, said: “It’s almost five years since the launch of the Help to Buy scheme and homeowners are approaching the time when they are required to start paying back the equity loan to the government. For anyone who purchased their new home using this scheme it might be a good time to review the options. Property prices have generally increased over the last five years and may continue to grow. Consideration to buying out the equity loan may be worthwhile.
“We’ve supported the local new build market for many years and seen business increase in this sector. The Help to Buy scheme has made a big difference to homebuyers and we’re committed to supporting those who are now approaching the fifth anniversary since taking their equity loan.
“Skipton has launched a range of remortgage options that will permit borrowing up to 90% of the property’s value so that funds can be raised to buy out the equity loan. These products come with a free mortgage valuation and £1,000 cashback to help with legal and administration fees and have been designed as a ‘help to buy exit’ strategy.
“Skipton’s new Help to Buy Exit products have been designed with the purpose of using that potential house price growth to exit the scheme to full ownership.
“Clearly, there will be Remainers and Leavers in this first round of ‘Hexit’. Whilst for some, it might be better to stay with HTB in the short term, others may benefit in the longer term by switching their mortgage and paying off their equity loan.
“Homeowners may wish to consider the long term benefits of exiting their HTB mortgage bearing in mind the interest payments on the equity loan will rise and by paying off the loan early, homeowners can lock in the full benefit of any future house price growth.”