Government Hint at 1% Deposit Mortgages for Borrowers

The Help to Buy 5% deposit mortgage scheme ended after its extension in March 2023 and since then there has been little help for younger people looking to get on the property ladder.  In return, the government get a 20% equity stake in the property and when the loan is due to be repaid, it is not the original 20% repaid, it is the equivalent value of 20% of the property equity value i.e., the government makes money as UK average property prices have increased 54.91% since April 2013 as at December 2023 (source Nationwide Property Index Calculator).

The Help to Buy Scheme:

• April 2013 – Offering 20% equity loan deposit by the government for new build property up to a maximum value of £600,000.  The remaining 5% of any deposit required to be raised by the borrower.
• February 2016 – Help to Buy extended by the government to a 40% equity loan for new build property in Greater London.
• May 2021 – Help to Buy was supposed to end but was extended until March 2023.
• March 2023 – Help to Buy scheme ended.

1% Deposit, 99% Mortgages Rumour

The ‘rumour mill/spin doctors’ are out there again and there is mounting speculation that the government will announce a 99% mortgage scheme in the Spring Budget 2024, where the government underwrites the risk for mortgage lenders with a mortgage guarantee scheme up to that level.  This will greatly assist those that are trying to get on the property ladder after prices increased so dramatically after the covid-19 lockdown period.

Comment

There is “no fire without a spark” and we cannot believe that after the debacle of 100% loan to value mortgages, toxic debt, banking collapses and the credit crunch crisis of 2008/09, the government is seriously considering a 1% deposit mortgage offering.

That said, is this about stimulating property prices again to boost ‘stealth’ taxes?  Higher property prices mean:

• Higher stamp duty revenue.
• Higher inheritance tax receipts.
• Highet capital gains tax revenues on 2nd home and buy to let investment sales.
• Higher property values to fund means tested social care fees.
• Higher ‘ATED’ annual tax on enveloped dwellings revenue.
• Greater government revenue on 20% or 40% equity loan repayments for the original help to buy scheme.
• Banking groups make money on loans with their capital secure with higher property prices.

We all know why the government wants a stronger property market.

Take a look at our Mortgage Costs Calculator: Mortgage Costs