New 95% mortgage guarantee scheme launches today, available on high streets across the country
The scheme was first announced at the 2021 Budget. The new 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 the following lenders on high streets across the country,
- and Virgin Money following next month.
The COVID-19 pandemic has led to a reduction in the availability of high loan-to-value (LTV) mortgage products, particularly for prospective homebuyers with only a 5% deposit. This has left many hard-working households unable to get on to the housing ladder.
The mortgage guarantee scheme will support a new generation in realising the dream of home ownership. This will enable more households to access mortgages, without the need for prohibitively large deposits.
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.”
How does it Work?
The government will provide lenders with the option to purchase a guarantee on the top-slice of the mortgage. In other words, the government will compensate the mortgage lender for a portion of the net losses suffered in the event of repossession. The guarantee will apply down to 80% of the purchase value of the guaranteed property.
The guarantee will be valid for up to 7 years after the mortgage is originated, evidence shows that loans are unlikely to default after such a period has elapsed.
How long is the Scheme valid for?
The scheme is intended as a temporary measure. It will be open for new mortgage applications from April 2021 to December 2022, in line with the government’s view that the current scarcity of high loan-to-value lending is primarily a response to the pandemic rather than a symptom of a longer-term structural change in the mortgage market.
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.”