General   |   April 23, 2021   |   Charlotte Hagan

5% deposit mortgages and borrowing up to 5.5x your wage

Share  

Great news for buyers, the government has now launched their new mortgage guarantee scheme which aims to help more people onto the housing ladder with a 95 % loan-to-value deal.

The chancellor Rishi Sunak has described the scheme as “a policy that gives people who can’t afford a big deposit the chance to buy their own home”.

This scheme allows buyers to purchase properties up to a value of £600,000 with a 5% deposit, but unlike the Help to Buy scheme, it will not be restricted to first-time buyers or specific property types, making even existing homeowners able to reap the benefits.

Many of the UK’s largest lenders will start offering mortgages within the scheme, including Barclays, HSBC, Santander, NatWest and Lloyds.

Richard Donnell, director of research and insight at Zoopla, said: “Supporting buyers with small deposits is key to widening access to home ownership for a part of the mortgage market that has been under-served. It is not a mass market solution and it’s vital we have a competitive market for lending up to 90% LTV  for a healthy housing market.

Also reflecting on the new 95% mortgage guarantee scheme, Rightmove’s director of property data Tim Bannister said: “The new mortgage scheme could help some first-time buyers bring their plans forward if they have a lower deposit but are still able to pass the affordability checks, and will be welcomed by those who last year we’re struggling to come up with a 15 or 20% deposit.

Not only this but news just in from the 26th April 2021, Nationwide’s Helping Hand product allows first timers the option of borrowing up to 5.5 times their income when taking a five or 10-year fixed rate mortgage up to 90 per cent Loan To Value – the most currently offered by any major high street lender.

Nationwide is explicitly targeting disenchanted private renters, saying: “Many renters still aspire to own their own home, but affordability remains one of the key issues stopping many from getting on the housing ladder. In the last 10 years the average price of a first time buyer property has increased by 41 per cent, while the average income has risen by just 18 per cent.”

There will be £1 billion of lending available via Helping Hand and the society will apply a lower ‘stress rate’ and higher maximum loan-to-income ratio where applicants opt for a standard five or 10-year fixed rate product.

The change means a first-time buyer couple with a joint income of £50,000 can now borrow up to £275,000 with Helping Hand, rather than the £225,000 they could borrow previously, assuming a 10 per cent deposit and no other costs impacting affordability.

The average first-time buyer property price in the UK is £196,2233. However, this varies widely across the country with the average first-time buyer property in London standing at £416,682, compared to just £110,556 in the North of England.

Nationwide insists that all applications will be subject to “robust underwriting checks, including full assessment of credit score and additional credit commitments.”

 

 


Articles and materials from the Petty Real website and newsletter are provided for informational purposes. Petty Real are not responsible for the accuracy, legality or content of any external sources referenced on this website. The information provided is for general information purposes only and you should not reply upon the material or information as a basis for making any business, financial or legal decisions.

  Back to news

You may also be interested in...

Top 10 reasons for walking away

General | 4 weeks ago

Top 10 reasons for walking away

Read more
Congratulations Lawrence!

General | 1 month ago

Congratulations Lawrence!

Read more
Housing secretary unveils £8.6bn funding package to boost home ownership

General | 1 month ago

Housing secretary unveils £8.6bn funding package to boost home ownership

Read more