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95% Mortgage Guarantee Scheme

Help is at hand for first time buyers and current homeowners to secure a mortgage with a deposit of only 5% - thanks to a new government-backed mortgage scheme. The new scheme 'guarantees' 95% mortgages and aims to encourage more high street banks to start offering them again, post pandemic.

Benefits of the UK 95% Mortgage Scheme

  • April 19th 2021 sees the launch of a new 95% mortgage guarantee on offer at high streets lenders around the country.
  • The scheme is part of a wider range of home ownership options and should help to make it become a reality.
  • Data reveals a high demand for home ownership since lockdown (around 80% of private renters are saving money for a mortgage deposit).
  • The launch should help to strengthen commitment by the government to further support the UK housing sector.

Note: Information in this news article explains how the 95 percent mortgage guarantee scheme works. Check to see if it can help you get on the property ladder by buying your first home with only a 5% deposit.

How the New 95% Mortgage Scheme Works

The government chose the Budget in March to announce details about the new 95 percent mortgage guarantee scheme.

As a result, the main purpose of the plan is to help first time buyers and home movers secure a mortgage using the least amount of capital for the deposit (e.g. only 5%).

Hence, by providing an affordable route to home ownership, aspiring and current home-owners will find it easier to buy a property (up to £600,000).

UK Lenders Offering 95% Mortgage Deals

Most of the major high street banks and building societies have already committed to launching mortgages under the new scheme, including:

  • Barclays
  • HSBC
  • Lloyds
  • NatWest
  • Santander
  • Virgin Money (starting May 2021)

Important: The guarantee offered by the government to cover the amount issued by lenders will be subject to the usual borrower affordability checks (e.g. credit score assessment and loan-to-income test).

Helping Households into Home Ownership

Several government home ownership schemes have already helped around 680,000 people climb on the property ladder since 2010.

Yet, a survey of private renters shows around 69% of those asked are unable to find an affordable mortgage with a low deposit. Thus, the new 95% mortgage guarantee scheme makes owning a home much more accessible.

Furthermore, a 2019 pledge to build 300,000 new homes per year for five (5) years will come from a £12 billion investment. It is the largest government funding for housing in more than a decade.

Tackling Housing Market Inequality

The UK Government’s commitment to tackling inequality in the housing market is notable. As part of their drive for ‘levelling up the country’, they delivered more homes in 2020 than in any other year since 1987 (according to their official statistics).

Even so, the actual terms of 95% mortgages are somewhat complicated. The government is ‘guaranteeing’ the portion of the mortgage that goes above 80% (e.g. 15% of a 95% repayment mortgage).

In practice, they will be compensating a portion of the lender’s outlay if a homeowner fails to pay their mortgage payments (defaults).

The scheme has several similarities to the Help to Buy mortgage guarantee scheme. More than 100,000 buyers used the scheme between 2013 and 2016.

New 95% Mortgage Guarantee Scheme Launched in April 2021