95% MORTGAGE GUARANTEE SCHEME

News

Find out how the new 95% mortgage guarantee scheme could help you in buying your first home with only a 5% deposit.

 

Just this month, the government has announced in the March Budget a new mortgage guarantee scheme in order to support the new generation to help them climb the property ladder.

 

What is the mortgage guarantee scheme?

The new mortgage guarantee scheme is a scheme set by the government that will be launched in April 2021 to support people who aspire to become homeowners by guaranteeing 95% mortgages for them with a 5% deposit. This scheme also aspires to increase the appetite of the lenders for high LTV lending to creditworthy clients.

 

With a 95% mortgage guarantee scheme, the government will guarantee 80% of the portion of the mortgage. This means that the government will compensate partially the lender if the homeowner fails to pay their mortgage. The government will compensate for a portion of the let losses suffered by the mortgage lenders in the event of repossession.

It is quite similar to the Help to Buy mortgage guarantee scheme which ran from 2013 to 2016.

 

What is the reason why the government is launching a 95% mortgage guarantee scheme?

Due to the Covid-19 pandemic, many areas have been affected including the financial market. The availability of high loan-to-value mortgage products has reduced for first-time buyers and not only for first-time buyers but also existing homeowners with low levels of equity are struggling to move as lenders shy away from the riskier loan. Moreover, one of the largest hurdles for most first-time home aspirers is to provide a larger or sufficient deposit.  

The government is launching this 95% mortgage guarantee scheme to give mortgage lenders the confidence to offer 95% mortgages again by taking part in some of the risks involved. 

 

Who is eligible to apply for this scheme?

The 95 percent mortgage guarantee scheme is available for first-time homebuyers in the UK and home movers as well.

 

It is required to live in the property yourself, second homes and buy-to-let properties are not allowed or permitted. And both new-build and existing properties that are priced up to £600,000.

 

The applicant should also meet the requirements in terms of the ability to pay the mortgage, such as loan-to-income and credit score test.

 

How long is the duration of the 95% mortgage guarantee scheme?

Since this scheme is a temporary measure, it will start in April 2021 and ends in December 2022. The government will review the need for the scheme towards the planned end date if there will be a need for an extension.

 

Many major lenders have agreed to participate in this scheme including HSBC, NatWest, Santander, and Barclays.

 

Bluestone Properties
Thinking of  buying property in south London or surrounding areas? Book an appointment to help you negotiate the local buy-to-let market, Bluestone Properties today by calling us on 0208 355 3405, emailing us at info@bluestoneproperties.co.uk.

---