Government backed 95% Mortgage

April 22nd, 2021

Following the Prime Minister Boris Johnson’s pledge last October to help renters become buyers, the new government-backed mortgage scheme has launched in the UK which will help first-time buyers, or current homeowners, secure a mortgage with just a 5% deposit.

This new reform will make the biggest expansion of home ownership since the 1980s when the right to buy policy was brought in my Margaret Thatcher.

It will form part of a variety of home ownership options to help people get on the housing ladder, amid a rise in demand during lockdown. More homes were delivered in 2020 than in any year since 1987 say official statistics.

What are 95% mortgages?

95% mortgages mean that first-time buyers or current homeowners can secure a mortgage with just a 5% deposit for a house up to the value of £600,000.

The UK 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 intended as a temporary measure in response to the pandemic and will be open for new mortgage applications from April 2021 to December 2022.

The government will compensate the mortgage lender for a portion of the net losses suffered in the event of repossession. The guarantee will apply down to 80% of the purchase value of the guaranteed property.

It will also review the continuing need for the scheme towards the planned end date and determine whether extending the period of eligibility for new mortgages would continue to deliver benefits for prospective homeowners.

Why have they been launched?

The new scheme has been launched to help make home ownership more affordable and accessible for aspiring home-owners.

In the March budget chancellor Rishi Sunak also extended a stamp duty holiday in England and Northern Ireland in response to the coronavirus pandemic.

The COVID-19 crisis has led to a reduction in the availability of high loan-to-value (LTV) mortgage products, particularly for prospective homebuyers that only have a 5% deposit therefore leaving many households unable to get on to the housing ladder.

Low-deposit mortgage availability has decreased since the pandemic hit the unfortunate rising unemployment, increased lender caution and record high property prices.

Earlier this year the Treasury said there were only 8 low-deposit products available nationwide in January 2021.

Your Independent Property Agent 
Emma Butcher 

01373 476440