Government support for 95% mortgage scheme launches

A new government-backed mortgage scheme will help first time buyers or current homeowners secure a mortgage with just a 5% deposit

The guarantee will be valid for up to seven years after the mortgage is originated, evidence shows that loans are unlikely to default after such a period has elapsed.

The scheme is intended as a temporary measure. It will be open for new mortgage applications from April 2021 to December 2022, in line with the government’s view that the current scarcity of high loan-to-value lending is primarily a response to the pandemic rather than a symptom of a longer-term structural change in the mortgage market.

First announced at the Budget, the scheme will help first time buyers or current homeowners secure a mortgage with just a 5% deposit to buy a house of up to £600,000.

The government will offer lenders the guarantee they need to provide mortgages that cover the other 95%, subject to the usual affordability checks.

The scheme is now available from lenders on high streets across the country, with Lloyds, Santander, Barclays, HSBC and NatWest launching mortgages under the scheme and Virgin Money following next month.

Since 2010, more than 663,000 households have been helped into home ownership through government schemes, but when asked, 69% of private renters and 63% of those living at home who had looked into a mortgage said they cannot find many mortgages with a low deposit.

Housing secretary Robert Jenrick MP said: ‘For too many people, no matter how hard they work, home ownership can seem out of reach. One of the biggest divides in our country has been between those who can afford their own home and those who cannot.

‘That’s why we are determined to do everything we can to help hard-working families and prospective first-time buyers get their feet on the housing ladder in an easy and affordable way, to level up this country.

‘The new mortgage guarantee scheme which comes into effect today will give providers the confidence to lend and help families and young people get on the property ladder without the prohibitive burden of a large deposit.

Miguel Sard, managing director of home buying and ownership at NatWest said: ‘We welcome the government’s new mortgage guarantee scheme to give further support to those with smaller deposits. For those customers, particularly younger or first-time buyers, saving up for a big deposit can often be difficult, and we know people in these groups are some of the hardest hit by the effects of the pandemic.

‘A government-backed scheme will help segments of the market for whom home ownership has felt far out of reach in recent months.’

The scheme is one of a range of flexible home ownership options available. These include Help to Buy, Shared Ownership and the First Homes Scheme. Figures show that the number of mortgage approvals for house purchases in January 2021 was 99,000 – a 40% increase on January 2020.

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