THE NEW 5% MORTGAGE SCHEME FOR FIRST-TIME HOME BUYERS LAUNCHED

19th April 2021
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Buying

Starting today, High Street lenders are now offering mortgages to borrowers with just a 5% deposit under the new government guarantee scheme. 


 



According to the research made by the government, 68% of private renters and 72% of adults living in their family homes said that they want to buy a home. The majority of them have been aware of the importance of homeownership due to the pandemic. 





Many first-time homebuyers and young generations who would like to own a home can often have difficulty saving up for a big deposit. Most lenders required buyers to pay a deposit of at least 10% which can be a bit difficult in areas with high property prices. And because of this in order to help first-time buyers get on the property ladder, the government stepped in. The 95% mortgage scheme was announced in the March Budget by Chancellor Rishi Sunak, is designed to help more first-time buyers climb the property ladder. 

 

What is the new mortgage scheme?


95% mortgage scheme is backed by the government as first-time homebuyers will only have to find half of the amount while the government will provide extra guarantees to the lenders who sign up for the initiative. This means the government is offering a partial guarantee of 15%, to compensate lenders if the borrower fails on repayments. 

 

The scheme will be available to first-time home purchasers buying a home costing up to £600,000. And applies to both new-build and existing properties. Second homes and buy-to-let properties are not permitted.

 

This scheme is also designed to give lenders the confidence to offer 95% loan-to-value (LTV) mortgages as many lenders shy away from the riskier type of loan.

The applicant should also meet the requirements in terms of the ability to pay the mortgage - loan-to-income and credit score test. So, anyone who has lost a job, or whose income is irregular due to the pandemic’s effect may find it difficult to secure a mortgage loan.

 

This week lenders such as Llyods, Barclays, HSBC, NatWest, and Santander are starting to offer the products. Virgin Money will start to offer next month. 

 

However, some lenders such as Halifax and Barclays will not provide the product for new build properties. 

 

Some new mortgage rates are close to 4 percent for two years fixed-rate deal. But with more lenders poised to launch deals for 95% mortgage scheme on the market will hopefully translate to more competitive rates for the borrowers.

 

This mortgage scheme will end in December 2022. Towards the planned end date, the government will review if there will be a need for an extension. 

 

Are you a first-time homebuyer? Call us at 0208 355 3405 or email us at info@bluestoneproperties.co.uk and see how we can help you in buying your first property. Bluestone Properties is an estate agency and letting agency based in Tooting, London. Feel free to Contact Us today!


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