New 95% Mortgages Launched

New 95% Mortgages Launched

This week sees the launch of the 95% mortgage scheme announced by Chancellor Rishi Sunak in the 2021 Budget. The scheme aims to help both first time buyers or current homeowners secure a mortgage on properties with a value of up to £600,000 with just a 5% deposit.

The scheme is now available from lenders such as Barclays, HSBC, NatWest, Santander and LLoyds. The initiative aims to encourage more people to invest in properties and become homeowners, even if they only have a small amount of savings. The coronavirus pandemic had a significant impact on the availability of low deposit mortgages, leaving many unable to afford to purchase a house.

PM Boris Johnson said about the scheme:

“For too many people, no matter how hard they work, homeownership can seem out of reach. One of the biggest divides in our country has been between those who can afford their own home and those who cannot.

The new mortgage guarantee scheme which comes into effect today will give providers the confidence to lend and help families and young people get on the property ladder without the prohibitive burden of a large deposit.”

According to, more than 687,000 households have been helped into homeownership through government schemes, and according to new figures, demand for homeownership has soared during lockdown, with nearly 80% of private renters now saving for a deposit.

Whilst demand for houses, and house prices have soared as a result of the Governments stamp duty holiday, the amount of people being accepted for mortgages is low, with lenders constantly tightening their criteria.

How does the scheme work?

The Coronavirus pandemic meant that we almost saw an end to high loan-to-value mortgages altogether, leaving many people unable to get a mortgage. The mortgage guarantee scheme gives lenders a guarantee on the “top-slice” of the mortgage. Essentially, this means that the government will compensate the mortgage lender for a portion of the net losses suffered in the event a borrower doesn’t make mortgage payments and the home is repossessed, and the guarantee will be valid for the first 7 years of the mortgage.

As expected, mortgages covered under the scheme are still subject to the usual affordability checks as other mortgages, to ensure borrowers aren’t borrowing more than they are able to pay back.

Currently, the government only plans for the scheme to be available from April 2021 to December 2022, when hopefully the country has started to recover from the economic impact the pandemic has had.