Great news for property buyers! The New Mortgage Guarantee scheme is to be announced in the budget on Wednesday the 3rd of March, and is encouragingly positive to say the least, with purchasers only having to lay down a 5% deposit, meaning the prospect of owning your own home, and not just for first-time buyers, is now within reach for many more hopefuls wanting to get on the property ladder.
When the first lockdown began last year, many businesses had to close their doors for good. This triggered a huge rise in unemployment. But as COVID-19 continued, so did the unease of further job losses. Due to this uncertainty, the housing market saw a huge drop in house purchases, and so to help kick start it again, the chancellor unveiled the Stamp Duty Holiday, to stimulate the economy, and to help first-time buyers, who could benefit from buying property up to the value of £500,000. Provisional data shows that because of this Stamp Duty Holiday, house sales rose substantially.
But there was still a problem with the higher mortgage deposits. Because of a reduction, and in some cases a total loss of income, due to lockdown, people were having to dip into their savings (for some, that hard-earned cash had been put aside solely for a house deposit). Realising that they could no longer afford to make such a big down payment, many gave up the hope of owning their own home and the housing market started to wane again. These fluctuations unsettled lenders and mortgage brokers who were not willing to take the risk of lowering the deposit for fear of many defaulting on their payments. With so much uncertainty about, the Government has decided to introduce the New Mortgage Guarantee Scheme to help re-boot the housing market.
What is the New Mortgage Guarantee Scheme:
The Government is pledging to offer lenders and mortgage brokers (not the buyer) the guarantee they’ll need, to cover 95% of a mortgage. These 95% mortgages had practically disappeared during COVID-19. This scheme will now hopefully encourage lenders and mortgage brokers to take the financial risk of offering a down payment of only 5% to home buyers. This guarantee will safeguard any financial consequences the lenders may be concerned about should any potential buyers default on their payments.
Who can qualify for the scheme:
- Anyone wishing to purchase a property, as it won’t only be restricted to first time buyers or those looking for a new build.
- It must still be the buyers’ only home and cannot be purchased as a second home, or for rental.
- The purchaser must of course still be able to meet the conditions of a regular mortgage contract.
Is there a price limit:
Yes, the scheme is available for properties ranging up to the value of £600,000.
There’s no better time to take advantage:
According to research about 86% of the housing market is valued at below £600,000, so there’s a lot of property choices out there at the moment. And whilst stamp duty is being extended, and the benefit of the 5% Mortgages Guarantee Scheme being initiated for many, there could be no better time than now, to take the opportunity to go for that dream home.