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Has your mortgage rate been affected by Help to Buy delays? Email money@telegraph.co.uk
First-time buyers using the Government’s Help to Buy scheme say they have been pushed onto expensive variable mortgage rates due to administrative errors and long wait times.
The Help to Buy equity loan scheme, which closed to new applicants last October, allowed buyers to purchase a new build home with a 5pc deposit and a 20pc Government-backed equity loan, or 40pc for those buying in London.
This loan was interest-free for the first five years. After that, interest is charged at 1.75pc – a rate which then increases by a measure linked to inflation. In July, this rate was 6.8pc.
But borrowers who are remortgaging are facing long delays and huge costs because of lengthy wait times and lost paperwork after the Government agency in charge, Homes England, switched administration of the scheme to a company called Lenvi in June.
It means some buyers who used the Government’s affordable homes scheme are now paying the most expensive mortgage rates on the market.
Telegraph Money analysis of official figures suggests there are around 40,000 borrowers who could be rolling off their low five-year fixed-term Help to Buy deals this month, while close to 30,000 could be looking to remortgage their two-year fixes.
Due to spiralling mortgage rates, borrowers who miss the deadline to remortgage could be forced onto expensive variable rate deals.
The average two-year fixed rate is currently 6.67pc; the average five-year fix is priced slightly cheaper at 6.16pc, according to analyst Moneyfacts. The average standard variable rate is 8pc.
A first-time buyer with a 30-year £240,000 mortgage on a 6.67% two-year fix is likely paying £1,544 in repayments each month. But if they are forced onto a variable rate, say 8pc, because of Help to Buy delays, that could balloon to £1,761 – an extra £217 a month.
Michael Wheeler, who lives in London, is trying to sell his Help to Buy property. He said the delays have become “stressful”.
“We went online and followed the [Help to Buy] process and transferred the administration fee – from then it was radio silence,” Mr Wheeler said.
“The email response from Help to Buy and Lenvi says they will get back to you in 10 days, but that didn’t happen.
“[The delays mean] we might not be in a position to proceed, and the bank is not going to hold the mortgage deal forever without lumping more charges on us.
“The scheme is there to encourage people to buy, but when you are looking to move on and buy a property with a mortgage, it’s like you are being penalised [by Help to Buy] because they are just not there to support you – it’s been a stressful process.”
‘I’m now on a 9.25pc mortgage rate’
Another borrower, Simon Davies from London, claimed he fell onto a very high variable mortgage rate after his fixed-rate deal expired while waiting for a reply from Help to Buy.
He said: “Due to Help to Buy not answering my calls – and losing emails and documents – I am now paying 9.25pc on my expired fixed-rate mortgage. My new remortgage deal expires soon and now I am in a desperate situation.”
Michael Williams, from Liverpool, posted: “[I am] unable to get in touch regarding a letter of postponement for my remortgage, causing me to now be put [on] a variable rate, which is unsustainable.”
Natalie Bradley, a conveyancing specialist at Stephensons, told The Telegraph that delays in the Help to Buy scheme have been “torturous” for first-time borrowers.
She said: “[The problems] have been exacerbated by a change in the equity loan administrator, switching from Target to Lenvi.
“The Help to Buy process has always been lengthy and overly bureaucratic, but after these recent changes, the process has become tortuous for some borrowers. This can often result in sales falling through or significantly higher mortgage costs as offers expire.
“Sadly, it is not uncommon to hear of people going to great lengths to chase up missing paperwork, including seeking out people on social media channels to try and escalate matters.”
A spokesman for Homes England said the department “apologises” for the long delays. They added that they have brought down their customer wait times from “hours” in July to only 7 minutes late last month.
A spokesman said: “We are working closely with our supplier to resolve this issue, and have introduced extra staff, extended working hours and new technology, all of which are taking effect.
“Customers who have a completion date or mortgage offer that is set to expire within the next seven days are advised to call the Help to Buy customer service line.“
A Lenvi spokesman blamed interest rate hikes for a surge in borrower demand for the poor service, as well as inheriting “complex” cases from the former administrator Target.
They said: “We experienced four times the average volume of incoming enquiries when we took over the administration of the service and have since extended our working hours and increased staff levels to support Homes England with this increase in demand.
“While we inherited a significant number of complex cases upon switchover, this backlog has reduced significantly, and we are seeing a continued reduction in call volumes. We remain on track to complete significantly more cases than Help to Buy has experienced previously since we have been managing the service.”
A spokesman for the Mayor of London, who this week called for the five-year interest-free period on Help to Buy loans to be extended, said: “It’s extremely worrying that first-time buyers who bought their home through the Help to Buy scheme are reporting being badly let down by the firm chosen by the Government to administer the scheme.
“Help to Buy homeowners are already facing a double whammy of higher mortgage payments and the end of the interest-free grace period on their Help to Buy loans. This bad situation is made worse if buyers can’t even get the vital paperwork they need to re-mortgage or sell because the firm running the Help to Buy scheme is failing.
“Ministers need to urgently sort out this chaos in the way Help to Buy is being run, and give first-time buyers greater support during the cost of living crisis. The Mayor is calling on the Government to urgently introduce a holiday on Help to Buy loan payments to give London homeowners breathing space.”
Martin Stewart, founder of mortgage advice service London Money, said buyers who have found themselves on variable rates because of delays should contact Homes England.
“One of the main unintended consequences of delays beyond the buyer’s control is that, as with a lot of new builds, mortgage offer end dates can come under pressure. I do think there is a case for some sort of compensation.
“Whilst many lenders might be able to accommodate some short term extensions, this might become more problematic during periods of volatility similar to what we have experienced over the past 12 months.
“If a buyer can not extend their offer and they need to revisit mortgage rates again they could easily find themselves paying much higher rates than they had previously budgeted for.”