The Chancellor, Rishi Sunak is expected to make an announcement in this week’s budget regarding a mortgage guarantee scheme aimed at small deposit buyers.
The scheme is aimed at first time buyers and will allow them from April 2021 to obtain a mortgage with only a 5% deposit on property values up to £600,000.
The Government will provide lenders the option to buy a Government guarantee that will compensate them for the other 95%, in the event the borrower failing to pay their mortgage repayments and defaulting.
According to the HM Treasury, lenders under the scheme will also offer 5-year fixed mortgages providing security for consumers.
Mr Sunak said: “ Many more products will become available and giving lenders the option of a government guarantee on 95% mortgages will help people onto the housing ladder”.
There has been a decline in 95% mortgages since the pandemic. Data from Moneyfacts show only 5 products at the start of the month compared to 405 at the start of February 2020.
Last year Boris Johnson suggested at the Conservative Party Conference that they will help turn ‘generation rent' into ‘generation buy’ and introduce a policy on long term fixed rate mortgages up to 95% Loan-to-value (LTV).
This is great news for first time buyers with smaller deposits. They will now have the chance to purchase their first home, assuming they can afford the mortgage repayments on a high loan to value of 95%.