95% mortgages have made a comeback following their withdrawal in 2020 as a result of the Coronavirus pandemic.
The new Government-backed mortgage guarantee scheme announced in the March 2021 Budget allows prospective home buyers to put down as little as 5% deposit for properties up to the value of £600,000 and is set to run from April 2021 until December 2022. With some of the UK's largest mortgage lenders on board including Lloyds, NatWest, Santander and HSBC, the scheme is available to first-time buyers and homemovers alike.
How does the mortgage guarantee scheme work?
For borrowers, the scheme will work like an ordinary mortgage fulfilling the Prime Minister's pledge to "turn generation rent into generation buy". With house prices rocketing and out of the reach of many first-time buyers, the new scheme provides a welcome boost to borrowers with smaller deposits. The scheme is a part of a wider range of measures to stimulate the housing market including an extension to the Stamp Duty holiday first announced in July 2020.
In practical terms, the scheme is designed to indemnify mortgage lenders against any losses they incur from borrowers failing to meet their obligations. The scheme aims to boost the confidence of mortgage lenders to take on higher LTV loans by sharing some of the risk with the Government.
Can I buy an older property under the scheme?
Under the scheme, both new build and older properties can be purchased provided the purchase price is below £600,000.
Who is eligible to apply?
In order to be eligible, you will need to find a property up to the value of £600,000 and be your main residence. The scheme is open to first-time buyers and homemovers but buying a second-home or a buy-to-let is not permitted.
To qualify under the scheme you will need to:
- To be a first-time buyer or homemover looking to buy a property for you to live in under £600,000
- Borrow 91-95% LTV
- Demonstrate that you have a regular income and you can afford the monthly repayments
- Be creditworthy.
What deals are available under the scheme?
Mortgage lenders including Barclays, HSBC, Lloyds Bank, NatWest and Santander have all launched 95% mortgage deals. As part of the scheme, lenders have also introduced a 5-year fixed deal to give borrowers stability over a prolonged period.
To find out more about the scheme and compare rates, why not contact our mortgage brokers in Nottingham? Our experienced advisors have access to the whole mortgage market and can advise on this and other schemes designed to help borrowers with small deposits.