Goodbye Generation Rent, Hello Generation Buy!
First announced by Rishi Sunak on 3rd March in his 2021 Spring Budget speech, and now very much a reality! The government backed mortgage scheme requiring just a 5% deposit has been launched by most major banks and building societies since April 19th.
The scheme is offered to first-time buyers and existing homeowners in England, and will see lenders advance 95% of the purchase price on homes worth up to £600,000 for new and resale homes. Buy-to-let and second home purchases are excluded from this.
Since the government launched schemes like Help to Buy and Right to Buy in 2010, over 681,000 households have been able to purchase a home and the introduction of the scheme demonstrates the commitment to support those wishing to become homeowners.
What is the scheme?
Based on the successful Help to Buy: Mortgage Guarantee scheme model, the new scheme is hoped to reinvigorate the high LTV (loan-to-value) mortgage market, with a model most lenders will be familiar with, enabling them to rapidly begin offering new 91-95% mortgage products.
The government will provide lenders with the option to purchase a guarantee on the top- slice of the mortgage. This means that in the event of a repossession the government will compensate the mortgage lender. The guarantee applies to 80% of the purchase price and will be valid for up to 7 years after the mortgage commences.
What is the Mortgage eligibility?
Designed to help creditworthy households that are struggling with saving a deposit, the following criteria must be met:
Be a residential mortgage (not second homes) and not buy-to-let.
Be taken out by an individual or individuals rather than an incorporated company.
Be on a property in the UK with purchase value of £600,000 or less.
Have a loan-to-value of between 91% and 95%.
Be originated between the dates specified by the scheme.
Be a repayment mortgage and not interest-only.
Meet standard requirements in terms of the assessment of the borrower’s ability to pay the mortgage, for example a loan-to-income and credit score.
To ensure affordability and predictable payments the government has stipulated that any lender participating in the scheme must offer a five year fixed rate product as part of their range of mortgages offered under the guarantee.
Set to end in December 2022, the UK’s major banks and building societies including Lloyds, Santander, Barclays, HSBC, NatWest and Nationwide have all since launched their version of the product and other banks have announced theirs will follow soon.
We’re here to help you get on the property ladder!
Need free mortgage advice?
At Simpsons Property, we’re proud to work alongside Mark O’Hara of Mark O'Hara Financial Ltd. With 30 years experience in the industry and being MAQ (Mortgage Advice Qualification) qualified, Mark has helped multiple Oxfordshire residents to become homeowners. If you’d like advice on what options are available, you can contact him on 01235 536000 or send him an enquiry here.
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