HM Treasury has revealed details of its new 95% LTV mortgage scheme for first time buyers which is likely to help stimulate activity on the first rung of the property ladder in the key ‘level up’ areas of northern England.
The first time buyer portion of the market has not benefitted from the stamp duty holiday or its extension because homes for sales under £300,000 were already exempt from the duty since November 2017.
But after Covid struck, the appetite to offer first time buyers 95% LTV mortgage among lenders has fallen off a cliff, dropping from 400 loans last year to almost zero now.
The new scheme, which will see the government underwrite lending of between 91% and 95% LTV for properties of any kind for sale under £600,000 bought by FTBs, will provide lenders with the option to purchase a government guarantee that compensates them for a portion of their losses in the event of foreclosure.
HM Treasury will charge a commercial fee for the provision of this guarantee, which will last until the end of the year and be limited to £3.9 billion of lending liability.
Zoopla analysis shows the greatest beneficiaries from greater availability of 95% LTV loans will be buyers within the most affordable parts of the UK where house prices are cheapest and most accessible to renters and those living at home with parents.
“The scheme will have less impact for buyers in southern England where high house prices are a major barrier to being able to afford a 95% mortgage. This aligns to the levelling up narrative and policy approach of Government,” says the portal’s research chief Richard Donnell (pictured).
Rightmove’s Director of Property Data Tim Bannister says: “The new mortgage scheme could help some first-time buyers bring their plans forward if they have a lower deposit but are still able to pass the affordability checks, and will be welcomed by those who last year we’re struggling to come up with a 15 or 20% deposit.”