Government-backed mortgage scheme launches

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April 22, 2021 - Kevin Dunn

Government-backed mortgage scheme launches

Mortgage lenders are now offering the new government-backed mortgage deal, launched to help those with a 5% deposit to buy a home and get on the property ladder.

The availability of the new mortgages comes as UK house prices hit record high levels. According to the Office for National Statistics house prices increased by 8.5% in 2020, reaching a record high of £252,000. This surge in the value of property has made it even harder for those saving for a mortgage deposit to keep up, many of whom have to continue to increasing their deposit savings just to keep up with rising markets.

This new policy has been eagerly awaited by many first time buyers, and was announced by the Chancellor Rishi Sunak in his Budget earlier in the year. Low deposit mortgages have not been readily available since the Covid pandemic, as mortgage lenders became increasingly nervous about the economy and only lending to those remortgaging or who had a large deposit.

The new mortgage scheme is available to anyone buying a home costing up to £600,000, unless they are buy-to-let or second homes. The government is offering a partial guarantee, generally of 15%, to compensate lenders if the borrower defaults on repayments. Lenders will still carry out affordability checks on the mortgage applicants. Anyone who has lost a job, or whose income has been volatile because of the pandemic’s effect on employment may still find it difficult to secure a home loan. Depending upon the Lender’s individual criteria, a borrower can take out a mortgage equivalent to a maximum of 4.5 times their annual income.

Coventry Building Society, Lloyds, Santander, Barclays, HSBC and NatWest are amongst the first lenders who will offer government-backed mortgages from the day of the policy launch on Monday 19th April 2021. Some lenders, such as Halifax and Barclays, have said that these products will not be available for new-build properties. Not all of the lenders have released full details of the mortgages they will offer, with more details expected to be announced in the coming weeks.

The government-backed mortgage scheme will be open to new applications until 31 December 2022, and people from every country in the UK will have access to them. If you are looking to buy a home and would like to find out more about the new government-backed mortgage deal and other loans available to you, call Furnley House on 0116 269 6311 and ask to speak to one of our specialist mortgages advisers. You can also email info@furnleyhouse.co.uk.

More information about the government backed low-deposit mortgage scheme can be found at https://www.gov.uk/government/publications/the-mortgage-guarantee-scheme

Your home may be repossessed if you do not keep up repayments on your mortgage.

Our blog is for your general interest. Whether or not it applies to your current financial position, please feel free to share it with friends, family, or colleagues who may be interested.