Chancellor Confirms Launch of New 95% Government Help-to-Buy ‘Mortgage Guarantee Scheme’ – Open to All Buyers

The chancellor has once again shown that the buoyancy of the property market is key to help the country avoid a major slump. It is also clear that the government believe owning a property remains one of the things most people want to achieve in their life.

Whilst being able to afford a mortgage is key to buying a property, a major stumbling block for many people who can prove affordability is still finding a lender who will take a risk on your only putting down a small deposit; such as 5%.

Low deposit loans are often seen as a major risk to a lender because borrowers could end up in negative equity if house prices fall – meaning they owe more than their property is worth.

The Chancellor has today put forward a scheme to try to give lenders more confidence and protection on small deposits. From April 2021 Lenders will be able to purchase a Government guarantee that compensates them for a portion of their losses in the event of foreclosure. All lenders under the scheme will offer mortgages fixed for at least five years as part of their range of products, providing options for buyers with smaller deposits who want the security and predictability of a mortgage with a fixed rate over a longer term.

Surprisingly, Mr Sunak has not restricted this just to first-time buyers or new-build homes. This scheme is open to anyone, although there will be a £600,000 limit on purchase prices.

The pandemic has meant there are very few mortgages on offer at 95% loan to value, in fact in January 2021 it was said that there were only about 8 deals available out of hundreds that would do this. However, under this new scheme we are expecting to see the number of 95% loans increase substantially, with some lenders offering these mortgages from as soon as next month.

Given that buying a property as a primary residence is still the only way in which you can make money tax free, as there is no Capital Gains Tax, this development will undoubtedly enable many thousands of people currently renting, to benefit from this uniquely good investment opportunity in the near future.

“A welcome and unprecedented Government scheme that brings fantastic news to anyone who can prove affordability but still struggles to raise a significant deposit.” Rob Starr, CEO – Seico Mortgages

For more information from the Chancellor on the new scheme please view short video here.

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