You are currently viewing Mortgage Lenders Launch 5% Deposit Deals With UK Government Backing

Mortgage Lenders Launch 5% Deposit Deals With UK Government Backing

In the March budget of 2021, Chancellor Rishi Sunak announced the new scheme which will see the UK Government back the mortgages. As of 19th April, 2021 the newly backed UK government scheme is to help people with 5% deposits get onto the housing ladder is now available. First time buyers will now be able to get a government backed mortgage with a 5% deposit from major banks and building society’s. The scheme is also being offered to current homeowners. The new mortgage scheme will be available to anyone buying a property costing up to £600,000, unless they are investing in buy-to-let or second homes. Since 2010, more than 687,000 households have been helped into home ownership through government schemes, but when asked 69% of private rents and 63% of those living at home who had looked into mortgages said they cannot find many mortgages with a low deposit. The new 95% mortgage scheme will now make it even more accessible to own a home.

Through the mortgage guarantee scheme, the government will offer a partial guarantee, generally of 15% to compensate the lender if the borrower defaults on repayments. It will provide lenders with the confidence they need to cover the remaining 95% of a loan subject to the buyer passing all affordable checks. The government will compensate the mortgage lender by up to 15% in the event of repossession. If a property was worth £300,000 the lender would offer 80% and the government would act as a guarantor on a further 15%, taking the total loan to 95% the buyer then would cover the remaining 5%. If the home got repossessed, the bank would then get that 15% back from the government. The scheme guarantee will be valid for up to 7 years after the mortgage is originated, evidence shows that loans are unlikely to default after such a period has elapsed. It will stay open for new mortgage applicants from April 2021, to December 2022. The government will review the continuing need for the scheme towards the planned end date, and determine whether extending the period of eligibility for new mortgages would continue to deliver benefits for prospective home owners.

Barclays have announced their mortgage guarantee scheme products backed by the UK government. The 95% LTV products available for submission from Monday 19th, April 2021 are a 3.99% 2-year fixed rate and a 4.09% 5-year fixed rate. Both have £0 fee on loans between £25k-£570k. From Friday 16th April 2021, customers applying to borrow at greater than 85% LTV can benefit from a new maximum loan size on houses and flats- for houses the max loan is now £570,000 and for flats £275,000. This is available on all purchases, including for first time buyers. A Barclays spokesperson said: “We are looking forward to supporting customers in their next steps as homeowners with the launch of two new 95% LTV products. These products are available under the governments mortgage guarantee scheme and are open for applications from Monday.”

NatWest and RBS have also signed up to the scheme where they will offer 5% deposit deals to both first-time buyers and existing homeowners. It will offer a 2-year fixed rate at a 3.90% interest rate and a 5-year fixed deal at 4.04%. The NatWest deals will be available to both employees and self-employed workers. Miguel Sand, of NatWest said: “We welcome the governments new mortgage guarantee scheme to give further support to those with smaller deposits. A government backed scheme will help segments of the market for whom home ownership has felt far out of reach in recent months.”

Lloyds Banking Group confirmed that its new deals will be available across its brands, Lloyds Bank, Bank of Scotland, and direct from Halifax, as well as through Halifax Intermediaries. Two-year and five-year product options will be made available.

A spokesperson for Virgin Money said: “We’re pleased to say that we will be an active participant in the governments mortgage scheme and we are due to announce our deals next month. The products available will be Virgin Money only and full details will be announced at launch.”

A Santander spokesperson said: “We’re pleased to be supporting the governments 95% mortgage guarantee scheme and look forward to sharing full details of the products available shortly.”

HSBC UK has confirmed their participation in the 95% governments mortgage scheme. The range includes mortgages fixed for two or five years, available to single or joint applicants, with the same rates whether taken out direct or through a broker. Two-year fixed rates are available from 3.99% with a £999 fee or 4.29% fee-free, while five-year rates start at 4.29% with a fee or 4.49% fee-free. HSBC UK’s Head of Buying a Home, Michelle Andrews, said: “We have supported home buyers and the wider housing market throughout the Global Pandemic and are excited to support the mortgage guarantee scheme. After such a turbulent year it is great that this scheme will make a real difference in enabling first-time buyers who didn’t think they would have a chance of getting a mortgage and home movers to get the keys to their new home.”

Nationwide said: “It is exploring different options to fully return to 95% loan-to-value lending in the coming months.”

Bank of Ireland, Coventry Building Society and Accord, Part of Yorkshire Building Society have also launched 5% deposit mortgages independently of the government scheme.

Housing Secretary RT Hon Robert Jenerick MP said: “For too many people, no matter how hard they work, home ownership 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. Todays 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 home ownership 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.”

There are other government schemes also available like Help To Buy, Shared Ownership and First Homes.