Government announces re-introduction of 95% mortgages for homebuyers

By Imogen Clegg • April 01, 2021 • Buyer's Blog, News
Chancellor Rishi Sunak announced plans to turn generation rent into generation buy. A new help-to-buy scheme will bring back 95% mortgages for those living in England and Northern Ireland from the 1st April. Alongside the extension of the stamp duty holiday, this will help many homebuyers get on the property ladder in 2021.    COVID-19 saw some huge changes with regards to 95% mortgages and they became pretty much obsolete. In February 2021 there were only 5 95% mortgage products available compared to 391 in March 2020. This has had a huge impact on homebuyers who may have suffered financial strain during the pandemic and therefore have been unable to save a hefty deposit.    As the housing market began to bounce back during the pandemic, this brought with it a rise in the average house price to £251,500. This has been a blow to many first time buyers who have been looking to purchase, and as such the number of properties bought by first time buyers with a mortgage below 10% has decreased by 80% since last year.    The Help To Buy Equity Loan Scheme will be open from April 2021 and will run until the end of 2022, with the aim of encouraging the younger generation and first time buyers to step up onto the property ladder instead of renting property.    Who is eligible?    Any household that is ‘creditworthy’ will be eligible for this scheme. If your household is struggling to save a large enough deposit, the scheme will help facilitate your purchase with a reduced deposit being allowed, as low as 5% according to Which. It only applies to properties that cost £600,000 or less, and only applies to standard residential homes and therefore will not include second homes or buy-to-lets.    The scheme could potentially see a slight rise in interest from the current level of 3-3.5% for 90% mortgages to 3.5-4% for the new 95% mortgages. However, lenders may adjust their rates and offer lower deals.    Neal Hudson, housing market analyst for BuiltPlace, states “A 95% mortgage is no help in London and other expensive parts of the country because you bump up against the affordability tests. It will really be most help in the Midlands and the north.” It is important to consider that these changes are aimed at helping the market as a whole and not a group of individuals.   As the world looks to get back to normal in the coming months, it is important for schemes like the help-to-buy and stamp duty holiday to be in place for those who need financial assistance.    If you are looking for your new home in 2021, MCR Homes have a range of houses and apartments that offer help-to-buy schemes. Enquire today to learn more.    Via The Guardian

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