15 Mar 2021
When the chancellor, Rishi Sunak, announced his budget last week, he talked about the government’s goal of turning generation rent into “generation buy”.
The measures he outlined to help would-be homebuyers had been heavily trailed – an extension to the stamp duty holiday he launched last year for England and Northern Ireland, and a new UK scheme to bring back 95% mortgages. But the budget documents brought more detail. We have looked at the small print to see what the measures will mean for homebuyers.
The initiative aims to encourage banks and building societies to offer 95% mortgages again. It will do this by giving them the chance to buy a guarantee on the portion of the mortgage between 80% and 95%. If a borrower gets into financial difficulty and their property is repossessed, the government will cover that chunk of the lender’s losses.
The scheme will open for new mortgage applications in April and run until the end of 2022. This scheme is for any “creditworthy” household struggling to save for a higher deposit. These will be standard residential mortgages – so no second homes or buy-to-lets – and the property has to cost £600,000 or less. The mortgages must be on a repayment basis, not interest-only.
In terms of interest rates, we don’t know yet but experts are predicting they will come in at below 4%. As part of the scheme, the government has told lenders they must offer a five-year fixed-rate deal so borrowers can lock their repayments at a set level for the medium term.