New 95% mortgage scheme launches

New 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.

• 95% mortgage guarantee launches today, available on high streets across the country
• Scheme part of a range of ownership options to help make home ownership a reality
• New figures show demand for home ownership has soared during lockdown, with nearly 80% of private renters now saving for a deposit
• Today’s launch further strengthens government commitment to supporting the housing sector

A new government-backed mortgage scheme to help people with 5% deposits get on to the housing ladder is available to lenders from today (19 April 2021).

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 – providing an affordable route to home ownership for aspiring home-owners.

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 today and Virgin Money following next month.

The government has made clear its commitment to tackling inequality in the housing market and levelling up the country. Official statistics show more homes were delivered in 2020 than in any year since 1987.

In 2019 a pledge to build 300,000 new and attractive homes a year was announced with an investment of over £12 billion in affordable housing over the next 5 years – the largest investment in a decade.

Since 2010, more than 687,000 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. Today’s new 95% mortgage scheme will now make it even more accessible to own a home.

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.

Mark Hayward, Chief Policy Advisor at Propertymark, said:

Over the past few months, there has been an increase in the number of prospective buyers and the number of house sales taking place. Coupled with the decision to extend the Stamp Duty holiday further, the Mortgage Guarantee Scheme will provide additional options for more people to become homeowners.

Access to finance and affordability plays a key role in the ability for people to purchase their dream home, so we are now very pleased to see further support for both first-time buyers and current homeowners looking to buy property or move up the housing ladder.

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.

Part of the government’s Plan for Jobs, the scheme will help to support the housing market and protect jobs and businesses across the housing supply chain, from housebuilders and estate agents, to tradespeople, DIY stores and removal firms.

The intervention comes as new figures published by the government show a greatly increased desire for home ownership and a sharp reduction in 95% mortgage availability over the past year.

The figures show that more than two-thirds of private renters (68%) and those living at home (72%) want to buy, with the majority saying the pandemic has made them more aware of the importance and benefits of home ownership.

The survey also found that 76% of private renters and 70% of those living at home have started saving for a deposit or put more money into their savings during the pandemic.

The delivery of more homes was also an integral part of the government’s most ambitious overhaul of the planning system in decades. The reforms will streamline processes, cut red tape and harness technology to deliver homes faster.

Other government home ownership options available include

 

95% Mortgages: First time buyers will be able to purchase a home with only a 5% deposit. The scheme will help to increase the supply of 5% deposit mortgages for credit-worthy households by supporting lenders to offer these products through a government-backed guarantee.

 

Help to Buy: A government equity loan that supports first time buyers with a low interest loan towards their deposit.

 

Shared Ownership: Gives first time buyers the option to buy a share of their home (between 25% and 75%) and pay rent on the remaining share.

 

First Homes: A new scheme designed to help local first-time buyers and keyworkers onto the property ladder, by offering homes at a discount of 30% compared to the market price.

From: Ministry of Housing, Communities & Local Government and HM Treasury

Published: 19 April 2021