95% mortgages are coming back!

4th March 2021

In yesterday’s budget statement, Chancellor Rishi Sunak announced the launch of a mortgage guarantee scheme, along with a commitment from a number of high street lenders, to come to market with 95% mortgages, starting next month – April 2021.  The scheme will effectively insure lenders against borrowers defaulting and lenders making a loss – encouraging them to lend against a 5% deposit, which is an area they currently see as too high-risk.

As a result it should be possible for prospective buyers to buy a property with a deposit from 5% in the coming weeks.  Great news for buyers who’ve been patiently saving towards a deposit, but have struggled to reach the minimum 10% currently required in most circumstances.

We don’t know what the rates and criteria will look like just yet, but if you’d like to be kept in the loop then sign up for our monthly newsletter – we’ll let you know when the new 95% products are launched.


Why is this new?

Up until the pandemic, there were many lenders who were providing 95% LTV mortgages. Due to the economic uncertainty and job insecurity accelerated by COVID-19, those lenders have chosen to rescind these products which require lower deposits. The result of this is that would-be first time buyers who have been saving for their first home, no longer have a large enough deposit to secure their mortgage.


The potential knock on effects

A side effect of the temporary reduced rates of stamp duty could be inflated house prices, meaning that first time buyers are hesitant to commit to high LTV mortgages. They fear that they’re at risk of finding themselves in negative equity upon the return of full rates of stamp duty, and the possibility of reduced property value that may come with it.

While the state guarantee to lenders could incur a potential risk of £44billion of the public purse, experts believe this to be a high end estimate, and unlikely in practice.

95% LTV mortgages were available before the pandemic, and yet owning a home remained a pipe dream for many. Whether this will open the floodgates is up for debate, but time will tell.


If you’d like to be kept in the loop and be notified when 95% mortgages return then sign up for our monthly newsletter.