Home buyers can now bag a mortgage with a 5% after a came into force on April 19.
We look at how it works and where you can get one.
How does it work?
The number of low deposit mortgages on the market shrank dramatically in the early days of the coronavirus pandemic, as lenders became much more cautious about offering “riskier” loans in the tough economy.
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The new scheme will tackle this by helping first-time buyers or current home owners secure a mortgage with just a 5% deposit to buy a house for up to £600,000.
It will work by the Government offering lenders the guarantee they need to provide mortgages that cover the other 95%, subject to the usual affordability checks.
In general, the scheme, which will be open for applications until December 31 2022, can be used for new or existing properties.
Lenders will be able to purchase a Government guarantee that would compensate them for a portion of their losses in the event of a repossession.
The guarantee will be valid for up to seven years after the mortgage is originated.
Where can I get a 95% mortgage?
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Lloyds, Santander, Barclays, HSBC 海角视频 and NatWest will be among the first to launch mortgages under the scheme, with Virgin Money following in May.
Why has the scheme been introduced?
The 海角视频 Government said that when asked, 69% of private renters who had looked into a mortgage said they could not find many deals with a low deposit.
Housing Secretary Robert Jenrick 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.”
He added: “Together we can turn Generation Rent into Generation Buy.”
Why now?
The new scheme has been launched at a time when house sellers are demanding record sums for properties.
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Rightmove said Monday that average seller asking prices hit a new record high of £327,797 in April, after jumping by £6,733 or 2.1% month on month.
According to financial information website Moneyfacts, 5% deposit deals have already started to make a return to the market in recent weeks, outside the scheme.
Moneyfacts recently counted 34 deals for borrowers with a 5% deposit available in April, down from just five in March.
This is still a long way away from the situation a year ago, when more than 160 deals for borrowers with 5% deposits were available.
Miguel Sard, managing director of home buying and ownership at NatWest said: “A Government-backed scheme will help segments of the market for whom home ownership has felt far out of reach in recent months.”
What other Government help is available for first-time buyers?
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.
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