In his Budget last month, Chancellor Rishi Sunak confirmed that the 95% mortgage scheme would boost the market and bring back the low-deposit mortgages that were largely withdrawn as a result of the pandemic. Most lenders were offering a maximum 90% loan to value mortgage. This made it difficult for many buyers to get onto the property ladder as they were unable to save a sufficient deposit. In addition, the market was largely closed during the first lockdown and by the time it reopened, a pent-up demand and a re-evaluation of buyer’s requirements resulted in a buoyant market and rising house prices. This further priced first time buyers out of the market.
The new government-backed low-deposit mortgage guarantee scheme is now available to lenders meaning that more options are available to first time buyers with a small deposit. What’s more, the scheme is open to all buyers, not just first time buyers and is available for all properties costing up to £600,000 and is not limited to newly built homes. According to figures from Rightmove, this accounts for 86% of all homes currently for sale.
The aim was “a policy that gives people who can’t afford a big deposit the chance to buy their own home.”
Until now, first time buyers have been unable to find a 95% LTV mortgage deal although one or two lenders would release products for a few days or weeks at a time and they would be restricted to certain postcodes.
Following the budget announcement, Rightmove reported that the use of their mortgage calculator jumped by 85% within half an hour of the announcement and traffic to the site jumped by 16%.
Mortgages under the scheme will be available until 31 December 2022. The affordability checks will remain the same with most mortgage lenders offering loans of up to 4.5 times the buyer’s salary.
If you are considering taking advantage of this new scheme, talk to us at The Mortgage Hub. We can advise you as to whether this is the best option for you and the costs involved.