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The new announcement in the 2021 Financial budget means that soon First-time buyers should be able to secure a mortgage with as little as a 5% deposit, with the government underwriting 95% loans

The UK housing market has received some great news in Rishi Sunak’s 2021 budget. Most significantly for first-time buyers, a new government scheme enables mortgage lenders to offer loans up to 95% of the value of a property, the stamp duty holiday has also been extended til June.

Most 95% mortgages available on the market were taken off the market by the majority of lenders at the start of the pandemic. Boris Johnson wants to turn generation rent into generation buy. The new scheme will be available from April and will work on all properties not just new builds up to £600,000 and buyers will need a 5% deposit.

How does the 95% mortgage scheme work?

The scheme is similar to the old the Help to Buy mortgage guarantee scheme

Under the new scheme, lenders (banks and building societies) that will be incentivised to offer 95% mortgages by the government, on the understanding that the government will guarantee outstanding loans if the buyer defaults and there is insufficient equity to pay off the loan and provide a margin for the lender.

The same affordability checks will apply, however – not just anyone with a 5% deposit will be able to take out these mortgages. Homebuyers must prove that they can comfortably afford the monthly repayments after other essential spending has been covered. Potential buyers looking for bad credit mortgages or self employed mortgages

How much deposit will I need with the mortgage guarantee scheme?

A 95% mortgage means that you will need to find a 5% deposit, for example if you are wanting to purchase a house for £200K you will need £10K deposit to secure a 95% mortgage. The scheme is a step in the right direction as most banks during the pandemic have been offering 85% maximum loan to value which means you would need a deposit of £30K to get a £200K house.

Stamp duty holiday extended until the end of June

Rishi Sunak has also extended the stamp duty holiday until June.

A petition signed by over 150,000 people and fears that thousands of buyers might pull out of transactions if they find they must pay stamp duty has forced an extension to ensure 1000’s dont pull out of chains and disrupt the industry. The combination of the mortgage guarantee scheme and the stamp duty holiday means it is a great time to buy!


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