New 95% mortgages for first-time buyers and existing homeowners

The government’s new scheme to help people buy a home with a 95% mortgage has now come into effect.

It means buyers can now get on the property ladder even if they only have a 5% deposit. The mortgages are available to both first-time buyers and existing homeowners for houses costing up to £600,000.

The government will offer lenders the guarantee they need to provide mortgages that cover the other 95%, subject to the usual affordability checks.

The Covid-19 pandemic has led to a reduction in the availability of high loan-to-value (LTV) mortgage products, particularly for prospective homebuyers with only a 5% deposit. The new scheme is intended to address that problem.

The mortgages are now available from lenders including Lloyds, Santander, Barclays, HSBC, NatWest and Virgin Money.

The government will compensate the mortgage lender for a portion of the net losses suffered in the event of repossession. The guarantee will apply down to 80% of the purchase value of the guaranteed property.

The guarantee will be valid for up to 7 years after the mortgage is originated; evidence shows that loans are unlikely to default after such a period has elapsed.

The scheme is intended as a temporary measure. It will be open for new mortgage applications until December 2022, in line with the government’s view that the current scarcity of high loan-to-value lending is primarily a response to the pandemic rather than a symptom of a longer-term structural change in the mortgage market.

Please contact us if you would like advice about the legal aspects of buying or selling a home.