Today marks the official launch of government-backed 95% LTV mortgages for first-time buyers who can only afford a 5% deposit on a home.
The initiative was announced during Rishi Sunak’s budget in March and is now “available on high streets across the country”, enabling first-time buyers to get on the housing ladder with a small 5% deposit on a property up to the value of £600,000.
The new mortgage rates can be accessed by the majority of high street lenders across the country, with Lloyds, Santander, Barclays, HSBC and NatWest launching mortgages under the scheme today. Virgin Money will join the programme next month.
Is There A Hole In The Plan?
As the scheme launches nationwide, the government’s press release says that, since the start of lockdown, nearly 80% of private renters have started saving for a deposit. This is a statistic that leads us to consider one potential flaw in the 95% deposit scheme: the lack of available properties.
Just because more people can now, in theory, afford to buy a home, that doesn’t mean they’ll be able to find one. Demand on the UK housing market has never been higher and supply continues to dwindle. If more new homes aren’t introduced to the market, homeownership will continue to be unattainable to many.
Housing Secretary Rt Hon Robert Jenrick MP said:
“For too many people, no matter how hard they work, homeownership can seem out of reach. One of the biggest divides in our country has been between those who can afford their own home and those who cannot.
“That’s why we are determined to do everything we can to help hard-working families and prospective first-time buyers get their feet on the housing ladder in an easy and affordable way, to level up this country.
“The new mortgage guarantee scheme which comes into effect today will give providers the confidence to lend and help families and young people get on the property ladder without the prohibitive burden of a large deposit.
“Despite the challenges faced over the past year, the government has intervened to protect jobs, support builders and buyers to help keep the housing market healthy. Today’s 95% mortgages launch further strengthens our commitment to build back better from the pandemic.
“In recent years we’ve reversed the trend and seen a positive increase in owner-occupiers. We’re determined to build on this through the range of flexible ownership options which help ensure homeownership is achievable. We want to match the ambitions of aspiring homeowners up and down the country.
“Together we can turn ‘Generation Rent’ into ‘Generation Buy’.”
Chancellor of the Exchequer, Rishi Sunak said:
“Every new homeowner and mover supports jobs right across the housing sector, but saving for a big enough deposit can be hard, especially for first-time buyers.
“By giving lenders the option of a government guarantee on 95% mortgages, many more products will become available, boosting the sector, creating new jobs and helping people achieve their dream of owning their own home.”