The government guaranteed, 5% mortgage deposit scheme has launched this week
High Street lenders are now offering mortgages with just a 5% deposit under a new government guaranteed scheme that launched on Monday. The policy, which was announced in the Budget, is designed to help more first-time buyers secure a home.
The scheme is similar to other policies previously used to boost the housing market and the economy, as well as offering support to those buying a home for the first time. However, the 5% deposit isn’t restricted to just first time buyers as anyone looking to buy a home up to £600k can apply, unless they are buying a second home or a buy-to-let.
The government is offering a partial guarantee, roughly 15%, to compensate lenders if the borrower defaults on repayments, which is designed to give lenders the confidence to offer the 95% LTV mortgages. So far, Lloyds, Santander, Barclays, HSBC and Natwest are starting to offer the products.
Chancellor 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.”
However, lenders will still carry out affordability checks. Anyone who has lost a job, or whose income has been sporadic owing to the pandemic’s effect on employment may find it difficult to secure a mortgage.