95% government backed residential mortgage scheme available to Lenders

A new government-backed mortgage scheme to help people with only 5% deposits get on to the housing ladder is available to lenders from 19 April 2021. First announced at the Budget, the scheme will help first time buyers or current homeowners secure a mortgage with just a 5% deposit to buy a house of up to £600,000 providing a route to homeownership.

The government will offer lenders the guarantee they need to provide mortgages that cover the other 95%, subject to the usual affordability checks.

The scheme is now available from lenders on high streets across the country, with Lloyds, Santander, Barclays, HSBC and NatWest launching mortgages under the scheme today and Virgin Money following next month.

The government has made clear its commitment to tackling inequality in the housing market and levelling up the country. Official statistics show more homes were delivered in 2020 than in any year since 1987.

In 2019 a pledge to build 300,000 new and attractive homes a year was announced 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. Today’s new 95% mortgage scheme will now make it even more accessible to own a home.

Housing Secretary Robert Jenrick 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. 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 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.”

Miguel Sard, Managing Director of Home Buying and Ownership at NatWest said: “We welcome the government’s new mortgage guarantee scheme to give further support to those with smaller deposits. For those customers, particularly younger or first-time buyers, saving up for a big deposit can often be difficult, and we know people in these groups are some of the hardest hit by the effects of the pandemic.

“A government-backed scheme will help segments of the market for whom home ownership has felt far out of reach in recent months.”

Mark Hayward, Chief Policy Advisor at Propertymark, said: “Over the past few months, there has been an increase in the number of prospective buyers and the number of house sales taking place. Coupled with the decision to extend the Stamp Duty holiday further, the Mortgage Guarantee Scheme will provide additional options for more people to become homeowners.

“Access to finance and affordability plays a key role in the ability for people to purchase their dream home, so we are now very pleased to see further support for both first-time buyers and current homeowners looking to buy property or move up the housing ladder.”

The scheme is one of a range of flexible home ownership options available. These include Help to Buy, Shared Ownership and the 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.

Part of the government’s Plan for Jobs, the scheme will help to support the housing market and protect jobs and businesses across the housing supply chain, from housebuilders and estate agents, to tradespeople, DIY stores and removal firms.

The intervention comes as new figures published by the government show a greatly increased desire for home ownership and a sharp reduction in 95% mortgage availability over the past year.

The figures show that more than two-thirds of private renters (68%) and those living at home (72%) want to buy, with the majority saying the pandemic has made them more aware of the importance and benefits of home ownership.

The survey also found that 76% of private renters and 70% of those living at home have started saving for a deposit or put more money into their savings during the pandemic.

The delivery of more homes was also an integral part of the government’s most ambitious overhaul of the planning system in decades. The reforms will streamline processes, cut red tape and harness technology to deliver homes faster.

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