“We need now to take forward one of the key proposals of our manifesto of 2019: giving young, first-time buyers the chance to take out a long-term, fixed-rate mortgage of up to 95 per cent of the value of the home – vastly reducing the size of the deposit. We believe that this policy could create two million more owner-occupiers – the biggest expansion of home ownership since the 1980s. We will help turn generation rent into generation buy.”said the PM.Play scatter slots.
Under the equity loan scheme the Government lends you up to 20 per cent of the cost of a new build home, so you’ll only need a 5 per cent cash deposit and a 75 per cent mortgage to make up the rest. The mortgage you get is for 75% of the LTV of the house. 20% is taken from an equity loan, with the final 5% taken from your deposit. In London, the 20% equity loan be as high as 40%, so you’d get a 55% mortgage. The equity loan is the special part of the Help to Buy scheme. You don’t pay any interest or fees on it for the first five years. Under the Scheme, eligible first home buyers can purchase or build a new home with a deposit of as little as 5 per cent (lenders criteria apply). This is because NHFIC guarantees to a participating lender up to 15 percent of the value of the property purchased that is financed. The scheme will do this by allowing first time buyers to pay a deposit as little as 5%, while avoiding lenders mortgage insurance (LMI). Most banks and lenders require a minimum deposit of 20% of the property’s value for the borrower to be exempt from LMI. Having a first-time buyer 5% deposit means that your LTV would be 95%, so some call them 95% mortgages - smaller deposits elevate risk for the provider, who might wish to charge a higher rate of.
In wake of the economic impact of the pandemic, this almost sounds too good to be true. Although there has been very little information provided about when this scheme will be introduced or how it will work, the announcement may provide some form of relief for young first-time buyers struggling to save up for a house deposit. When the scheme has been introduced we will update you with further advice and our experts will be here for you. Please follow Wolferstans Solicitors on social media where our legal experts will provide guidance in line with the latest updates and announcements.
Here is what one of our experts have to say and some tips for you to prepare for the alleged new scheme:© Provided by The i A mortgage guarantee scheme to encourage home ownership and help buyers with deposits of just 5 per cent to get on to the property ladder will be announced on Wednesday (Photo: Andrew Matthews/PA)
A mortgage guarantee scheme to encourage home ownership and help buyers with deposits of just 5 per cent to get on to the property ladder, is due to be announced when Chancellor Rishi Sunak delivers his Budget this Wednesday.
The government will offer incentives to lenders, bringing back 95 per cent mortgages which have “virtually disappeared” during the pandemic, according to the Treasury – although it’s expected such a move will also push house prices up.
Mr Sunak says public finances are facing a “challenge” from the pandemic’s impact on the economy, with the government having borrowed £271bn this financial year – up £222bn on 2019-20.
There is a £600,000 threshold for applicants to the new mortgage scheme, although it is not limited to first-time buyers or new build homes.
The coronavirus pandemic has meant there are now few low-deposit mortgages available, the Treasury said, with just eight on the market in January.
Low-deposit mortgages are deemed riskier, as they are more vulnerable to negative changes in property prices, so people hold more debt than their home is worth.
The new scheme will launch across the UK in April, with the government offering to take on some of this risk.
Prime Minister Boris Johnson said the plans are to help “generation rent to become generation buy”, adding: “Young people shouldn’t feel excluded from the chance of owning their own home and now it will be easier than ever to get onto the property ladder.”
Mr Sunak said: “Owning a home is a dream for millions across the UK and we want to help as many people as possible. Saving up for a big deposit can often be difficult and the pandemic has meant there are fewer low deposit mortgages available.”
It is not dissimilar to the Help to Buy mortgage guarantee scheme, which closed to new loans at the end of 2016, and was believed to have “reinvigorated the market for high loan-to-value lending after the 2008 financial crisis”, according to the Treasury.
Yet housing charity Shelter said that scheme increased house prices by 1.4 per cent.
New Homes 5 Percent Deposit
Shadow housing secretary Thangam Debbonaire was critical, saying young people needed “genuinely affordable” new houses to be built, and did not want to go “back to the days of sky-high mortgages”.
5 Percent Deposit
It’s thought the new scheme could coincide with the expected end of a stamp duty holiday in England and Northern Ireland on 31 March – although it’s likely this will be extended until June.