Government launches 95% Mortgage Guarantee scheme

Extract from Redwood Financial’s Residential Property Review April 2021

The government-backed 95% mortgage guarantee scheme, originally announced in the Budget, was launched on 19 April, aiming to help first-time buyers or homeowners obtain a mortgage with a 5% deposit to buy a property of up to £600,000.

The scheme offers lenders the guarantee they need to provide 95% mortgages and is subject to other affordability and credit checks as usual. There are currently five high street lenders offering mortgages under the scheme: Lloyds, Santander, Barclays, HSBC and NatWest. Virgin Money is due to follow next month. Some other lenders, such as Accord, had already returned to 95% mortgages without using the scheme.

Chancellor Rishi Sunak said, “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.”

Reaction to the scheme across the industry has been mixed. Trussle’s Head of Mortgages Miles Robinson said, “With lenders still viewing the high loan-to-value market as risky, interest rates on the new 95% LTV deals are more expensive, with some close to 4%.” Mark Hayward, Chief Policy Advisor at Propertymark, said, “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.”

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