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Mon 29 Mar 2021
In the 2021 Budget, Chancellor Rishi Sunak made a pledge to make low-deposit lending more widely available.
During the pandemic mortgage lenders became noticeably risk averse, generally reducing maximum loan to values from a pre-pandemic level commonly at 95% with some lenders withdrawing down to 85% loan to values. This made it very challenging for first time buyers, in particular, to find enough deposit to enable a home purchase.
Greater access to 95% mortgages will come as very welcome news to many first-time buyers - and those who want to realise their dream of owning their own home.
The Government will offer from 19th April 2021, a scheme, running until 31st December 2022, guaranteed mortgages, lenders will be willing to reintroduce low-deposit lending.
The idea behind the new 95% home loans – requiring a deposit of just 5% – is that they will provide a real boost for many would-be homebuyers who were finding it too much of a struggle to scrape together 10%.
This will hopefully mean that young buyers previously locked out of the housing market will now be able to get onto the property ladder.
I am a First Time Buyer, so how much deposit will I need?
Instead of needing a 10% deposit – and having to save £20,000 to buy a £200,000 home – you will now only need a 5% deposit. This means only having to amass £10,000 to buy that same £200,000 property.
For those looking to buy a more expensive property costing £500,000, the required deposit will now be £25,000, as opposed to £50,000 prior to the scheme. The scheme limits the value of the property bought to £600,000.
As the upfront costs will be lower, the cost of stepping onto the housing ladder becomes significantly reduced (though buyers will still need to be mindful of the other upfront costs of buying a home, including the valuation, surveyor, estate agent and legal fees, as well as stamp duty).
Most banks are typically prepared to lend at no more than 4.5 times a buyer’s annual salary and first time buyers must fit a mortgage's lending criteria. Not all lenders will be offering this 95% mortgage guarantee scheme so it will be a case of consulting an independent mortgage broker or individual lenders, if approach is made directly.
Which banks are taking part?
So far, lenders including Lloyds, Santander, NatWest, HSBC and Barclays have all said they are looking to offer 95% mortgages once the scheme begins.
More lenders – including Virgin Money – are expected to follow suit soon after.
Further information can be viewed here: https://www.gov.uk/government/publications/the-mortgage-guarantee-scheme
"I must say I've worked with several agents in Suffolk, Surrey and Norfolk and with you people I feel like we're working in partnership and I find the help you're offering as far in excess of anything I've found before. In fact because of this I'm going to be looking to invest in more property around Beccles instead of Surrey where I've been looking"