In April the UK Government launched their new scheme to make mortgages more accessible. Their 95% mortgage guarantee means people with just a 5% deposit will be able to get a mortgage on homes with valuations up to £600,000. It will allow more first time buyers to get on the property ladder as well as making it easier for current homeowners to move if they choose to. As the leading mortgage advisors Bristol has, we want to take a closer look at the scheme and how it works.
95% mortgages coming
The Government originally announced their mortgage plans in the Budget. The scheme became available on 19th April and high street lenders including HSBC, NatWest, and Lloyds all began offering the mortgages. Virgin Money followed other lenders in May.
The new mortgages come as a response to the reduction in high LTV products on the market. Many lenders withdrew them due to the COVID-19 pandemic. This made it much harder for households to get on the housing ladder as they would require much larger deposits.
Mortgage guarantee to help buyers with 5% deposit
The new mortgages work because the Government gives lenders a guarantee on the amount they are lending. What this means is that if someone defaults, the lender can get compensation on up to 80% of the purchase value from the Government. This can offer protection against net losses. As a result, a lender can have far more confidence giving finance to people who only have a 5% deposit. Buyers do need to pass all the usual affordability checks though, ensuring they can afford the mortgage repayments.
The guarantees will be valid for the first 7 years of the mortgage. This is the period when defaults are most likely to occur. After this the likelihood of a default is much lower.
The 95% mortgage guarantee scheme will be available from April 2021 until December 2022. It is only a temporary measure at the moment but the Government will review it towards the end of next year to see if an extension is necessary.
Talk to expert mortgage advisors in Bristol
Your Space Mortgages works hard to ensure we can give our clients the right advice about buying a home. We can work with them to consider all of the options, including the new 95% mortgage. Plus, we can look at the whole market to find the best deals.
So, if you want to work with the top mortgage advisors Bristol has, speak to us. We are a friendly, professional team.