There have been significant changes to the UK mortgage market this month that aim to make mortgages more attainable to those who thought buying a property was out of their reach. This will enable a new generation to realise the dream of home ownership.
The introduction of the government’s mortgage guarantee scheme announced in the Budget on the 3rd of March increases the availability of 95% Loan-to-value mortgage products enabling a higher number of people access to mortgages without the need for large deposits.
Since the start of Covid-19 in March 2020 the number of low-deposit mortgages drastically decreased. Those offering 95% mortgages to first time buyers fell from 391 to just 3 in just under a year as lenders shied away from high risk loans. The government’s new mortgage guarantee scheme gives lenders the confidence to offer these again by taking some of the risks involved with doing so.
The scheme will be reviewed before the end date but will initially run from April 2021 to 31 December 2022.
The scheme will enable first-time buyers and homeowners to secure a mortgage with a 5% deposit on a property of up to £600,000.
Rishi Sunak announced:
‘’Lenders who provide mortgages to homebuyers who can only afford a 5% deposit will benefit from a government guarantee on those mortgages.
And I’m pleased to say that several of the country’s largest lenders including Lloyds, NatWest, Santander, Barclays and HSBC will be offering these 95% mortgages from next month.’’
In addition to the government scheme, online mortgage broker and lender Habito announced its launch of ‘Habito One’ a long-term fixed rate mortgage with a maximum deal period of 40 years.
Since the financial crash in 2008 mortgages which let borrowers lock their rate for longer than 10 years have been few and far between with risk-averse lenders generally offering between two and five years for fixed rate deals.
According to Habito, an October survey conducted of 1,480 homeowners and its customers found three in 10 (30%) said they would be interested in switching to a long-term fixed rate mortgage for flexibility, certainty and protection against interest rate rises.
The Habito One mortgage rates start at 2.99% with a range of deposit options from 40% to 10%, with the lender confirming plans to offer 5% mortgages later this year. The 40-year 90% loan has a fixed interest rate of 5.35%.
The deal will be available to first-time buyers, home-movers, and those re-mortgaging in England & Wales.
Habito boss Daniel Hegarty said:
‘’The mortgages we have available to us today are remnants of a different age and a different power dynamic between customers and lenders.
The future has never been less predictable, and we need our homes to provide us with safety and financial security.’’
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