A new government-backed mortgage scheme to help people with 5% deposits get on to the housing ladder is available to lenders from today (19 April 2021).
First announced at the Budget, the scheme will help first time buyers or current homeowners secure a mortgage with just a 5% deposit to buy a house of up to £600,000 – providing an affordable route to home ownership for aspiring home-owners.
The government will offer lenders the guarantee they need to provide mortgages that cover the other 95%, subject to the usual affordability checks.
The scheme is now available from lenders on high streets across the country, with Lloyds, Santander, Barclays, HSBC and NatWest launching mortgages under the scheme today and Virgin Money following next month.
The government has made clear its commitment to tackling inequality in the housing market and levelling up the country. Official statistics show more homes were delivered in 2020 than in any year since 1987.
In 2019 a pledge to build 300,000 new and attractive homes a year was announced with an investment of over £12 billion in affordable housing over the next 5 years – the largest investment in a decade.
Since 2010, more than 687,000 households have been helped into home ownership through government schemes, but when asked, 69% of private renters and 63% of those living at home who had looked into a mortgage said they cannot find many mortgages with a low deposit. Today’s new 95% mortgage scheme will now make it even more accessible to own a home.
Housing Secretary Rt Hon Robert Jenrick MP said:
“For too many people, no matter how hard they work, home ownership can seem out of reach.”
“One of the biggest divides in our country has been between those who can afford their own home and those who cannot.”
“That’s why we are determined to do everything we can to help hard-working families and prospective first-time buyers get their feet on the housing ladder in an easy and affordable way, to level up this country.”
“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.”
“In recent years we’ve reversed the trend and seen a positive increase in owner-occupiers.”
“We’re determined to build on this through the range of flexible ownership options which help ensure home ownership is achievable. We want to match the ambitions of aspiring homeowners up and down the country.”
“Together we can turn ‘Generation Rent’ into ‘Generation Buy’.”
Chancellor of the Exchequer, 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.”
Miguel Sard, Managing Director of Home Buying and Ownership at NatWest said:
“We welcome the government’s new mortgage guarantee scheme to give further support to those with smaller deposits.”
“For those customers, particularly younger or first-time buyers, saving up for a big deposit can often be difficult, and we know people in these groups are some of the hardest hit by the effects of the pandemic.”
“A government-backed scheme will help segments of the market for whom home ownership has felt far out of reach in recent months.”
Mark Gordon, director of mortgages at comparethemarket.com, comments:
“Homebuyers with purchases in progress will breathe a sigh of relief if the Chancellor confirms an extension of the stamp duty cut at next week’s Budget.”
“Our latest research shows three out of four homeowners, and two-thirds of first-time buyers believe a stamp duty holiday extension will benefit the property market.”
“However, there’s a concern that the Chancellor may just be kicking the can down the road, since it is likely that there will be another rush to complete ahead of the new deadline.”
“Our research shows that one in five first-time buyer property deals fell through since the pandemic began last year, and this group said the stamp duty deadline was one of the main reasons for the collapse.”
“Any jump in house prices will also present a challenge for potential first-time buyers struggling to save for a deposit.”
“Some lenders have put stricter mortgage lending criteria in place, with nearly one-quarter seeing their mortgage offer reduced.”
Mark Hayward, Chief Policy Advisor at 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.”
Susan Allen, CEO Retail and Business Banking at Santander said:
“We know that raising a large deposit can often be challenging for potential home buyers, so we’re pleased to be part of the government’s Mortgage Guarantee Scheme offering a range of 95% mortgages to help both first-time buyers and home movers.”
“As one of the UK’s largest mortgage lenders we see how important homeownership is to our customers and we use our wide experience and expertise to support them throughout the home buying process.”
Michelle Andrews, HSBC UK’s Head of Buying A Home said:
“We have supported home buyers and the wider housing market throughout the pandemic and are excited to support the Mortgage Guarantee Scheme.”
“After such a turbulent year it is great that this scheme will make a real difference in enabling first time buyers who didn’t think they would have a chance of getting a mortgage and home movers to get the keys to their new home.”
The scheme is one of a range of flexible home ownership options available.
These include Help to Buy, Shared Ownership and the First Homes Scheme. Figures show that the number of mortgage approvals for house purchases in January 2021 was 99,000 – a 40% increase on January 2020.
Part of the government’s Plan for Jobs, the scheme will help to support the housing market and protect jobs and businesses across the housing supply chain, from housebuilders and estate agents, to tradespeople, DIY stores and removal firms.
The intervention comes as new figures published by the government show a greatly increased desire for home ownership and a sharp reduction in 95% mortgage availability over the past year.
The figures show that more than two-thirds of private renters (68%) and those living at home (72%) want to buy, with the majority saying the pandemic has made them more aware of the importance and benefits of home ownership.
The survey also found that 76% of private renters and 70% of those living at home have started saving for a deposit or put more money into their savings during the pandemic.
The delivery of more homes was also an integral part of the government’s most ambitious overhaul of the planning system in decades.
The reforms will streamline processes, cut red tape and harness technology to deliver homes faster.
Nick Barnes, Head of Research at Chestertons, says:
“The sales market shows no sign of slowing down, with buyers still motivated by a combination of the Stamp Duty holiday, the easing of lockdown restrictions and the search for homes that match their revised housing requirements in light of the changes brought about by the coronavirus.”
“The market is likely to receive a further boost with the commencement of the government’s new Mortgage Guarantee scheme which lenders will operate from today.”
“With 46% more properties available to buy at the end of March than a year ago, buyers will have a great chance of finding their ideal property.”
“The London property market woke up in March, with a 57% increase in the number of people looking to buy and a 21% increase in the number of tenants looking to move compared to February, according to Chestertons.”
Guy Gittins, Chestertons’ CEO, comments:
“To date, it has been the most active market we have seen since 2006 based on the volume of property transactions, conducted viewings and the number of buyers entering the market.”
“Equally, we have seen a steady increase in properties coming to the market which, in the long run, will result in property prices staying pretty flat.”
The agency reports that between February and March, it saw a 39% increase in property viewings, 28% in offers made by buyers and 40% increase in new properties coming to the market for sale.
Cory Askew, Chestertons’ newly-appointed Head of Sales, concludes:
“With people’s lifestyles changing almost overnight, larger properties with gardens outside of Central London have been the big winners from lockdown and although they remain in strong demand, we are starting to see buyers and tenants returning to more central parts of London in anticipation of returning to their offices in the summer.”