• Stevan Paul

Buy your home with a 5% deposit

The 95% Mortgage Guarantee Scheme

What is the mortgage guarantee scheme? Set to launch in April, the mortgage guarantee scheme will see the government ‘guaranteeing’ 95% mortgages for buyers with 5% deposits. The scheme was announced in the March Budget and has been designed to encourage banks to start offering 95% mortgages again, after nearly every single one was withdrawn during the pandemic. Under the terms of the scheme, the government will guarantee

the portion of the mortgage over 80% (so, with a 95% mortgage, the remaining 15%). This might sound complicated, but in practice it just means the government will partially compensate the lender if a homeowner defaults on (fails to pay) their mortgage. The scheme will be quite similar to the Help to Buy mortgage guarantee scheme, which ran from 2013 to 2016.

Who is eligible to apply? The mortgage guarantee scheme is open to first-time buyers and home movers across the UK. You’ll need to be buying a property to live in yourself – second homes and buy-to-let properties are not permitted. Both new-build and existing properties priced up to £600,000 are eligible. You’ll need to apply for a repayment (not interest-only) mortgage and pass standard affordability checks, including a loan-to-income test and credit score assessment. Finally, the mortgage you’re applying for will need to be for between 91% and 95% of the value of the property you’re buying, which you'll see described as 'LTV'. The scheme will initially run from April 2021 to 31 December 2022, though this will be reviewed before the end date.

Which lenders will offer mortgages under the scheme? The government says that major banks including Barclays, HSBC, Lloyds Bank, NatWest and Santander have all committed to launching 95% deals from April. Virgin Money and some other lenders look set to follow suit shortly after that. Under the terms of the scheme, participating lenders will need to offer a five-year fixed-rate mortgage as part of their range. The government says this will give borrowers the security of predictable repayments for a longer period.

Further Information and How to Apply. Mortgages Made Easy Norfolk will help you with this and will be ready to advise on the right mortgage deal for your circumstances. To find out how best to prepare get in touch now.

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