A new government-backed 95% mortgage scheme has launched to assist first-time buyers or current homeowners to acquire a mortgage with a 5% deposit.
From today (19 April), first-time buyers and current homeowners with 5% deposits will be able to use a new government-backed mortgage scheme to access 95% mortgages from high-street lenders.
The scheme was first announced at the previous Budget and will help homeowners with a 5% deposit to buy a house of up to £600,000. The government-backed scheme will offer lenders the guarantee they need to provide mortgages that cover the other 95%, subject to the usual affordability checks.
High-street lenders including Lloyds, Santander, Barclays, HSBC and NatWest have launched mortgages under the scheme today, with Virgin Money following next month.
The government will provide lenders with the option to purchase a guarantee on the top-slice of the mortgage, which will apply down to 80% of the purchase value of the guaranteed property. The guarantee will be valid for up to 7 years after the mortgage is originated.
The scheme is intended as a temporary measure, and it will remain open for new mortgage applications from April 2021 to December 2022. Towards the planned end date the government will review the continuing need for the scheme, and determine whether extending the period of eligibility for new mortgages would continue to deliver benefits for prospective home owners.
Housing Secretary Robert Jenrick said:
“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.
Despite the challenges faced over the past year, the government has intervened to protect jobs, support builders and buyers to help keep the housing market healthy. Today’s 95% mortgages launch further strengthens our commitment to build back better from the pandemic.
Together we can turn ‘Generation Rent’ into ‘Generation Buy’.”
Chancellor of the Exchequer, Rishi Sunak said:
“Every new homeowner and mover supports jobs right across the housing sector, but saving for a big enough deposit can be hard, especially for first time buyers.
By giving lenders the option of a government guarantee on 95% mortgages, many more products will become available, boosting the sector, creating new jobs and helping people achieve their dream of owning their own home.”
See more information on the mortgage guarantee scheme.