New government-backed 95% mortgages guarantee scheme launches today

A number of lenders have launched their new 95% mortgages today with help from the government’s mortgage guarantee scheme.

The initiative, which aims to help those with lower deposits onto the housing ladder by offering incentives to lenders in order to provide 95% LTV mortgages, many of which were removed from the market as a result of the pandemic, should boost demand for property; good news for estate agents.

The mortgage guarantee scheme will allow buyers to acquire properties valued up to £600,000 with a 5% deposit, but unlike the Help to Buy scheme, it will not be restricted to first-time buyers or specific property types, with existing homeowners able to reap the benefits.

The chancellor Rishi Sunak has described the scheme as “a policy that gives people who can’t afford a big deposit the chance to buy their own home”.

Many of the UK’s largest lenders will start offering mortgages within the scheme, including Barclays, HSBC, Santander, NatWest and Lloyds.

Richard Donnell, director of research and insight at Zoopla, said: “Supporting buyers with small deposits is key to widening access to home ownership for a part of the mortgage market that has been under-served. It is not a mass market solution and it’s vital we have a competitive market for lending up to 90% LTV  for a healthy housing market.

“Greater availability of 95% mortgages will have the greatest benefits for buyers in lower value housing markets in northern England and Scotland where a 95% mortgage is more attainable.

“The scheme will have less impact for buyers in southern England where high house prices are a major barrier to being able to afford a 95% mortgage. This aligns to the levelling up narrative and policy approach of government.”

Also reflecting on the new 95% mortgage guarantee scheme, Rightmove’s director of property data Tim Bannister said: “The new mortgage scheme could help some first-time buyers bring their plans forward if they have a lower deposit but are still able to pass the affordability checks, and will be welcomed by those who last year we’re struggling to come up with a 15 or 20% deposit.

“Although the number of new properties coming to the market is improving, it’s still nowhere near enough to satisfy the buyer demand that is already at record levels, and so more people choosing to trade up will be vital to open up more choice at the start of the property ladder.

“The combination of not enough stock and high demand will help underpin prices, and over the past five years asking prices of a typical first-time buyer home have already increased by £23,000 on average, so those who can now afford to buy a home will be trying to make the move quickly in case prices rise further.”

If you have any questions regarding 95% mortgages or the property market as a whole, get in touch with our teams of experts here