The government has announced a Mortgage Guarantee Scheme that will be open to new 95% mortgages from 19 April 2021. The scheme is not limited to just first time buyers, but also all residential borrowers, but excluding buy-to-let and second home owners.
The government says the scheme will help to support a new generation to realise the dream of home ownership. Increasing the availability of 95% loan-to-value mortgage products, means more households gain access to mortgages without the need for large deposits. The scheme is available for purchases up to £600,000 and will be open for new mortgages until 31 December 2022.
The government’s policy of backing these low deposit mortgages was in part to help increase their availability, which had all but disappeared when the pandemic started. Note that there are quite strict lending multiples applied to these new 5% products. We are seeing more lenders coming back into the market with this product, so choice is increasing and that should drive competitiveness. It is recommended to seek professional mortgage advice to help select a suitable product.