The government has launched a new mortgage scheme aimed at helping people with 5% deposits get onto the housing ladder.
The scheme, first announced in March’s Budget, will allow first-time buyers or current homeowners to secure mortgages on homes of up to £600,000 with just a 5% deposit.
High street lenders will be offered government guarantees for up to seven years to provide mortgages covering the other 95%, applying down to 80% of the purchase value of the property.
Lloyds, Santander, Barclays, HSBC and NatWest have launched mortgages under the scheme today, while Virgin Money will do so next month.
The government says the scheme, which joins other initiatives such as Help to Buy and First Homes, will help boost the housing sector and provide an affordable route to home ownership for people locked out of the housing market.
The housing secretary Robert Jenrick MP 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.”
The launch of the new mortgage scheme comes as government figures show a greater desire for home ownership and a reduction in high loan-to-value mortgage products since the start of the COVID-19 pandemic.
The number of mortgage approvals for house purchases in January 2021 was 99,000 – a 40% increase on figures from January 2020.
Meanwhile, polling of private renters and people living at home found that over two-thirds want to buy a property. However, a similar number of those who had looked into or researched a mortgage said they could not find many mortgages with a low enough deposit for them to afford.
The temporary scheme will initially be open for new mortgage applications from April 2021 to December 2022. The government will review the ongoing need for the scheme towards its planned closure.
Mark Hayward, chief policy advisor at property experts Propertymark, said: “Over the past few months, there has been an increase in the number of prospective buyers and the number of house sales taking place. Coupled with the decision to extend the stamp duty holiday further, the mortgage guarantee scheme will provide additional options for more people to become homeowners.
“Access to finance and affordability plays a key role in the ability for people to purchase their dream home, so we are now very pleased to see further support for both first-time buyers and current homeowners looking to buy property or move up the housing ladder.”
Image credit: Pixabay