A new government scheme will enable mortgage lenders to offer loans up to 95% of the value of a property. A 95% mortgage means that homebuyers can borrow up to 95% of the purchase price of the property with the remaining purchase price being made up of the 5% deposit, which is an especially attractive product for first-time buyers eager to get onto the property ladder.
On the 3rd March the Chancellor, Rishi Sunak, announced the Mortgage Guarantee Scheme in the 2021 budget. The scheme is designed to encourage lenders to start offering 95% mortgages again, with the government acting as a guarantor should the borrower default on the loan.
During the Covid-19 pandemic we have seen a dramatic decrease of high loan-to-value (LTV) mortgages on offer from lenders. Until recently most lenders weren't offering anything more than an 85% mortgage, so this scheme will be welcomed news for those looking to purchase their first home.
The Mortgage Guarantee Scheme will run from April 2021 to December 2021 and will then be reviewed. The scheme will enable homebuyers to purchase properties worth up to £600,000 with just a 5% deposit. As part of the scheme lenders must offer a 5-year fixed rate mortgage which will also give borrowers a longer period of stability. Both first-time buyers and existing homeowners can take advantage of the scheme.
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*This article is provided for general information purposes only and does not constitute legal advice or other professional advice.