On the 3rd of March, Rishi Sunak, announced the Government’s annual budget in Parliament. The announcement outlined the financial changes that will be made in the months ahead.
During the announcement, Sunak confirmed the Government will be supporting buyers by providing a Government guarantee to support 95% LTV mortgages, which he claims have virtually disappeared. This means that home buyers can buy with as little as a 5% deposit. The scheme is intended to launch from April and will apply to both first time buyers, as well as homeowners purchasing property up to the value of £600,000.
It was noted that many large high street lenders are in support and will be offering the 95% LTV loans, these include Lloyds, HSBC, Natwest and Virgin Money, amongst others.
It is important to be aware that lenders will only provide mortgages to those with a regular income, irrespective of any Government incentive. The Government is not providing any direct funding to support buyers, but instead an incentive to the lenders to take on some of the risks involved with higher lending brackets.
It is understood that the average asking price for a property in England is circa £200,692 which would mean a deposit of around £10,000 would be required, with a mortgage to support the remaining amount.
As a result of the Coronavirus pandemic, 95% LTV mortgages have almost all disappeared. This has meant that home movers and first-time buyers have needed more money to facilitate a deposit and has resulted in more and more people going into rented accommodation. The aim of the Government scheme is to turn “Generation rent” into “Generation buy”.
The announcement has already created interest, with Rightmove revealing that the use of its mortgage calculator has jumped by 85% within the first half an hour.