The 95% Mortgage Guarantee Scheme: A Boost for Homebuyers
The UK government’s 95% Mortgage Guarantee Scheme, announced by Chancellor Rishi Sunak in the 2021 Budget, aims to help more people get on the property ladder and has been extended to 30 Jun 25. Here’s what you need to know:
Key Features
– Allows buyers to purchase homes with just a 5% deposit
– Available for properties valued up to £600,000
– Open to first-time buyers and current homeowners
– Applies to residential mortgages, not second homes or buy-to-lets
– Mortgages must be on a repayment basis, not interest-only
– Scheme runs until 30 June 2025[3]
Eligibility Criteria
– Must be 18 or over
– Purchasing a home in the UK as primary residence
– Applying for a repayment mortgage
– Property value up to £600,000
– Not available for new-build properties
How It Works
The government provides lenders with the option to purchase a guarantee on the top-slice of the mortgage. In other words, 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[2].
Benefits
– Makes homeownership more accessible for those struggling to save large deposits
– Particularly helpful in expensive areas like London
– Not limited to first-time buyers, also available to home movers
Considerations
– Higher interest rates compared to larger deposit mortgages
– Risk of negative equity if property values fall
– Standard affordability checks still apply
Impact on the Market
While the scheme is expected to help many buyers, its impact on overall market activity and house prices is likely to be modest. Much depends on how many lenders participate and the value of money committed against higher loan-to-value products
How to Apply
1. Check your eligibility
2. Compare mortgage offers from participating lenders
3. Prepare necessary documents (proof of income, ID, etc.)
4. Apply directly with a lender or through a mortgage broker[1]
We do not charge a fee for mortgage advice.
Your home/property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.
Remember, while this scheme can be helpful, it’s essential to carefully consider your financial situation and long-term affordability before committing to a mortgage. Your home may be repossessed if you do not keep up repayments on your mortgage.
Sources
[1] Mortgage guarantee scheme: 95% mortgages – Money Saving Expert https://www.moneysavingexpert.com/mortgages/new-mortgage-scheme-for-5-deposit/
[2] New 95% mortgage scheme launches – GOV.UK https://www.gov.uk/government/news/new-95-mortgage-scheme-launches
[3] The mortgage guarantee scheme – GOV.UK https://www.gov.uk/government/publications/the-mortgage-guarantee-scheme
At Yes Mortgage Services, we offer a comprehensive range of products from across the market.
Irrespective of whether you are looking to buy a new home, re-mortgage an existing property, or looking to protect your family from the unpredictability that life throws at it or protect your income if you are unable to work due to accident or ill health.
Yes Mortgage Services are committed to offering you the highest possible standards of service. We can undertake the whole process from answering the initial questions through to handling multiple product applications. Ensuring that everyone gets treated with the same urgency and maintaining your best interests are our main goals irrespective of the value of the mortgage.
We recognise that both we and our customers have everything to gain if we look after your best interests and treat you fairly in all aspect of our dealings with you.
