Sarah is here to help house buyers and sellers get to grips with the conveyancing process. This month, she outlines the new Mortgage Guarantee Scheme launched by the government…
On April 19, the government announced it was backing a new Mortgage Guarantee Scheme, to enable first time buyers to secure a home with just 5% deposit. It is available across the UK and is part of a range of ownership options to make house buying a reality for those unable to take that first step onto the property ladder.
New figures show that demand for home ownership soared during lockdown, with nearly 80% of all private renters now saving for a deposit. This new scheme will provide an affordable route for new buyers and current homeowners to secure a mortgage on a property up to the value of £600,000.
How will the new government scheme work?
The government is, in effect, offering lenders the guarantee they need to provide mortgages of up to 95%, subject to the usual affordability checks. It is currently available through most high street banks, including Lloyds, Santander, Barclays, HSBC and NatWest, with Virgin Money coming on board later this month.
Under the scheme, there is an option to purchase a guarantee for 80% of the property’s value, which means the government will compensate the lender for a proportion of any net losses it incurs in the event of repossession. The guarantee will be available for seven years from the date the mortgage commences.
The Mortgage Guarantee Scheme is available on new lending from April 2021 until December 2022. By increasing the availability of 95% loan-to-value mortgages, it is hoped more young people will take that all important first step onto the housing ladder.
The scheme will also be open to existing property owners who wish to move somewhere larger, freeing up the supply of affordable starter homes.
How do I know if I qualify for the scheme?
It is important to note that the Mortgage Guarantee Scheme does not cover repayments, so if you are looking to take on borrowing at 95%, you must make sure you can service the monthly instalments in the same way as any other mortgage.
In order to qualify for the new scheme, you must pass the usual affordability tests. There are no charges to sign up, but the interest rates on applicable mortgages may differ from those on other products.
If you are looking to purchase your first house, but have limited deposit funds available, this scheme is certainly worth looking into. To find out more, don’t hesitate to contact me or my conveyancing colleagues on (0114) 218 4000 or email info@tayloremmet.co.uk
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