Rishi Sunak announced the scheme in his annual economic update, in what was widely welcomed as good news for those trying to get on the property ladder. The scheme is backed by the Government and will help individuals with a small, five percent deposit. Lenders will be able to enact the scheme from today, forging ahead for those hoping to purchase property.
Lloyds, Santander, Barclays, HSBC and NatWest will be launching mortgages under the scheme today.
They are to be followed by Virgin Money who will begin offering the new mortgage deal next month.
Housing Secretary, Robert Jenrick, commented on the new deal to help people become homeowners.
He said: “For too many people, no matter how hard they work, home ownership 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.
“That’s why we are determined to do everything we can to help hard-working families and prospective first-time buyers get their feet on the housing ladder in an easy and affordable way, to level up this country.
“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.”
The scheme is another offer made available within the market to assist individuals with homeownership.
Help to Buy has been popular for offering a leg-up onto the property ladder, often for those with fewer finances than usually required to secure a mortgage.
As a result of the pandemic, it has been difficult to secure lower deposit mortgages.
Options for a 95 percent mortgage have significantly dwindled over the last year as lenders have become cautious.
This appears to revolve around fears individuals may default on their mortgage.
The new scheme, therefore, is likely to provide hope to those hoping to secure a deal.
Nick Barnes, Head of Research at Chestertons, also spoke about the new release.
He said: “The sales market shows no sign of slowing down, with buyers still motivated by a combination of the Stamp Duty holiday, the easing of lockdown restrictions and the search for homes that match their revised housing requirements in light of the changes brought about by the coronavirus.
“The market is likely to receive a further boost with the commencement of the Government’s new Mortgage Guarantee scheme which lenders will operate from today.
“With 46 percent more properties available to buy at the end of March than a year ago, buyers will have a great chance of finding their ideal property.”
The scheme, however, is intended to be a temporary measure to help the housing market.
The Government has said it will operate for new mortgage applications from April 2021 to December 2022, as it believes the lack of 95 percent mortgages is symptomatic of the pandemic, rather than issues with the mortgage market.
The end date is to be reviewed closer to the time to see if the scheme still remains necessary.