95% mortgages are back!
The UK government has announced the launch of a new 95%
mortgage scheme.
·
95% mortgage guarantee launches today, available
on high streets across the country
·
Scheme part of a range of ownership options to
help make home ownership a reality
·
New figures show demand for home ownership has
soared during lockdown, with nearly 80% of private renters now saving for a
deposit
A new government-backed mortgage
guarantee scheme, announced in the March Budget, to help people with 5%
deposits get on to the housing ladder will be available to lenders from today
19 April 2021, a spokesperson confirmed.
The scheme will help BOTH first time buyers AND current
homeowners obtain a mortgage with a 5% deposit to buy a house of up to £600,000
– offering a route to home ownership to those with low deposits.
For more details see https://homebasedbusinessideasuk.blogspot.com/2021/04/property-news-95-mortgages-available-now.html
The government is essentially giving lenders the guarantee they
need to provide mortgages that cover the other 95%, subject to the usual
affordability checks. In the past, insurance companies provided this guarantee
for a premium.
The scheme is now available from major high street lenders
across the country today, including Lloyds, Santander, Barclays, HSBC and
NatWest and Virgin Money following next month.
In 2019, the government made a pledge to build 300,000 new
and attractive homes a year with an investment of over £12 billion in
affordable housing over the next 5 years – the largest investment in a decade.
Since 2010, more than 687,000 households have been helped
into home ownership through government schemes, but when asked, 69% of private
renters and 63% of those living at home who had looked into a mortgage said
they cannot find many mortgages with a low deposit.
The guarantee scheme is one of a range of flexible home
ownership options available including:
·
Help to Buy
·
Shared Ownership
·
First Homes Scheme.
Figures show that the number of mortgage approvals for house
purchases in January 2021 was 99,000 – a 40% increase on January 2020.
The government has helped over 685,000 households to purchase
a home since 2010 through government backed schemes including Help to Buy and
Right to Buy.
Taxpayers will bail out banks if loans default and they
lose money
The higher the loan-to-value, the higher the risk for
lenders, as borrowers have less skin in the game and can walk away in the event
of a property crash or negative equity.
The mortgage
guarantee scheme provides lenders with the option to purchase a guarantee
on the top-slice of the mortgage, which means the government will compensate
the mortgage lender for a portion of any net losses incurred in the event of
repossession. In other words, the guarantee applies down to 80% of the purchase
value of the guaranteed property.
The guarantee will be valid for up to 7 years after the
mortgage has started and evidence shows that loans are unlikely to default
after this time.
However, the scheme is intended as a temporary measure and
will be open for new mortgage applications from April 2021 to December 2022.
Lenders can still pursue you for losses after you have
been repossessed if they do not get their money back on a ‘forced sale’ –
usually at auction.
The government said the current scarcity of high
loan-to-value lending is a response to the pandemic rather than a symptom of a
longer-term structural change in the mortgage market.
The government will review the scheme towards the planned
end date to determine whether extending the period of eligibility for new
mortgages would continue to deliver benefits for prospective buyers.
The stamp
duty holiday comes to an end in June, prompting fears of a slowdown in the
property market. The new guarantee scheme could push prices to new record highs
making it more difficult for first-time-buyers to get on the property
ladder.
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