Door opens on second phase of Help to Buy

The second phase of the Help to Buy scheme was launched yesterday as banks finally published details of their deals. To date, only the Government-backed banks have announced rates, with RBS and NatWest already taking applications and the Halifax set to start in a few days.

Meanwhile, HSBC said it will join the scheme "before the end of the year" and smaller lenders such as Virgin Money and Aldermore said they will offer Help to Buy deals from January.

The Coalition's scheme aims to help buyers who can afford only small deposits to buy a home. Originally launched in April, it was only available to buyers of newly built homes, who were eligible for a 20 per cent equity loan from the Government on top of their 5 per cent deposit.

Under the second phase – originally planned for January but rushed forward to this week by the Coalition – the Government offers a guarantee of 15 per cent of the loan to the lender, for a fee. "The fee is being passed on to the borrower, which means that while the Help to Buy 95 per cent deals are lower than those not part of the scheme, they are not as cheap as an 80 per cent deal," Sylvia Waycot of Moneyfacts said.

Analysts calculated that anyone borrowing £20,000 through the scheme could cut their monthly costs by more than £100 compared with a best buy 95 per cent mortgage outside the scheme.

Paul Smee of the Council of Mortgage Lenders said the new scheme "is likely to lead to an increase in the availability of high loan-to-value mortgages as it should enable the lending industry to have greater confidence in making mortgages available to creditworthy borrowers with low deposits". Government ministers trumpeted the success of their policy and refuted claims that it would lead to a housing bubble.

The Treasury Secretary Danny Alexander said: "People who think there's a housing bubble should get out more."

But Oliver Atkinson of the online estate agents Urban Sales said: "Just as the housing market starts cooking on gas, along comes the Government with a jerrycan full of petrol.

"The proponents of Help to Buy are guilty of both pyromania and amnesia – fanning the flames of a housing boom and forgetting how badly burnt the market got just a few years ago."