There is some good news for property buyers; the New Mortgage Guarantee scheme which was announced in the budget on 3rd March, is very encouraging and positive, with buyers only having to put down a deposit of 5%. This means that the dream of owning your own home can now become reality.
Only 5% deposit needed
With the first lockdown last year, many businesses had to close their doors for good, which resulted in a massive increase in unemployment. But as the lockdowns continued, so did the anticipation of yet more job losses. Because of this uncertain situation, the housing market took a hit with a huge drop in home purchases, so to help get it going again, the chancellor announced the Stamp Duty Holiday. This resulted in property purchases rising significantly, as the savings for buyers is a maximum of £15,000 on a property priced £500,000 or more.
However, there was still an issue with the higher mortgage deposits. Due to the lockdowns and people suffering a substantial loss of income as a result, people have been having to dip into their savings – and for some, those savings were meant to be put aside for a deposit on a house. With the realisation that they could no longer afford to make such a big down payment, many gave up hope of being a homeowner and the housing market started to deteriorate. This situation was obviously unsettling for lenders and mortgage brokers who were understandably not willing to take the risk of lowering the deposit for fear of people defaulting on their mortgage payments. With all this going on, the government took the decision to introduce the New Mortgage Guarantee Scheme in the hope that this would once again regenerate the housing market.
What is the New Mortgage Guarantee Scheme?
The government is pledging to offer lenders and mortgage brokers the guarantee they’ll need, to cover 95% of a mortgage. Since the start of all the lockdowns these 95% mortgages had all but disappeared. This new scheme will now, with a bit of luck, encourage lenders to take the financial risk of offering buyers the chance to own their own home with only a 5% deposit. This guarantee will protect the lenders from any financial consequences of buyers defaulting on their mortgage payments.
Who qualifies for the scheme?
Anyone who wants to buy a property, whether first time or not. It must however be the buyers’ only home, and not be a buy-to-let purchase or a second home. The buyer must of course still be able to fulfil the criteria of a standard mortgage contract.
Is there a purchase price limit?
Yes, the scheme is only available for property purchases up to the value of £600,000.
This is the time to take advantage
As approximately 86% of the housing market is valued at less than £600,000, there is still a lot of choice out there. And due to the fact that the Stamp Duty Holiday is being extended, coupled with the 5% Mortgage Guarantee Scheme, the time is most definitely now to take full advantage of the current situation and to finally realise your dream of owning your own home.