Leading mutuals shun Help to Buy scheme

Two of the UK’s leading building societies have dealt a blow to the government’s flagship Help to Buy mortgage scheme by admitting they have no plans to sign up to the initiative. The Nationwide and Coventry building societies have announced that they have no plans to sign up to Help to Buy, a programme designed to help homebuyers struggling to find a large deposit.

The Nationwide – one of the UK’s largest mortgage lenders – says that it can fund 95 percent mortgages more cheaply itself than signing up to the government scheme. Keep reading to find out more.

Nationwide and Coventry reject Help to Buy scheme

The Nationwide has become the first of the UK’s ‘big six’ lenders to reject participating in the Help to Buy scheme, suggesting it can fund 95 percent mortgages more cheaply itself.

The Help to Buy scheme is aimed at providing wider access to high loan to value mortgages for first time buyers and home movers. Lloyds Banking Group and Royal Bank of Scotland offer mortgages through the scheme but other lenders have been slow to follow suit. HSBC, Santander and Barclays have now signed up but two of the UK’s major mutual lenders say they won’t participate in the scheme.

Nationwide already offer 95 percent mortgages and will not be involved in Help to Buy while the UK’s third largest building society, the Coventry, have also announced that they will not take part.

A spokesman from Nationwide said: “It is true that we are not planning to offer Help to Buy 2 at present as we are already very active in the market – as our interim results demonstrated.”

A spokeswoman for Coventry said: “Given the strength of our capital position, we are in a position to do this without using government schemes and for this reason have no current plans to join. The matter will be kept under review.”

Treasury denies pressurising large mortgage lenders to take part in Help to Buy scheme

A Treasury spokesman denied that the government had put pressure on Nationwide to participate in the scheme and would not comment on whether it was disappointed by the lack of take up of Help to Buy 2 by building societies.

The spokesman said: “The Help to Buy scheme is voluntary. Participation is a commercial decision for lenders and, so far, over 65 percent of the mortgage market are committed to the scheme.”

Paul Broadhead, head of mortgage policy at the Building Societies Association, said he welcomed the government’s focus on increasing lending for borrowers with smaller deposits.

“Clearly it is aimed at reducing the market failure in this area of lending,” he said. “But while the banks had largely exited this space many building societies have been offering high loan to value loans for some time. If building societies are already lending at high loan to values then it follows that they have less need for the guarantee provided by the government scheme.”

Mr Broadhead defended mutuals’ decision not to join the scheme. He added: “Some mutuals will still be considering their options but others will have reached the conclusion that it is better value for them and their members to remain outside of the scheme.”

Islay Robinson, CEO of London mortgage broker and high value mortgage specialist Enness Private Clients said: “The cost of the Help to Buy scheme won’t make it financially viable for all lenders to participate. Smaller lenders in particular may be able to offer 95 percent mortgages funded from their own resources rather than paying the Treasury for the guarantee under Help to Buy.”