How the mortgage guarantee scheme will help buyers with 5% deposits
Chancellor Rishi Sunak announced in the Spring Budget that the government is introducing a mortgage guarantee scheme to help first-time buyers and existing homeowners.
He explained a little about how the scheme will work and what it means for buyers during his speech in the Commons, and in this article we’ll share everything we know so far.
How will the mortgage guarantee scheme work?
Under the new scheme, which will launch in April, first-time buyers and existing homeowners will be able to purchase homes worth up to £600,000 with a deposit of just 5%.
And this means that the majority of buyers should be eligible for the scheme, as our data analysts have found that 86% of properties currently listed for sale on our site have an asking price of £600,000 or less.
However, please note that with an average asking price of £621,886, many properties across Greater London will be priced above the scheme’s proposed threshold of £600,000 (see below).
The way the scheme works is that the government pledges to repay lenders some of their losses if you as the buyer default on your mortgage repayments for any reason.
In return for this guarantee, lenders have to sell mortgages worth up to 95% of a home’s price – so that you as the borrower can proceed with a deposit of 5%.
It’s a potential game-changer for many first-time buyers as lots of 95% mortgages were made unavailable during the past year.