Rishi Sunak’s plans for the economy continue to be released ahead of his budget statement on Wednesday, the latest being a plan to help first time buyers with small mortgage deposits get on the property ladder.
Due to start in April, the scheme will help the tens of thousands of young buyers who were excluded from the market by the disappearance of 95% LTV mortgages at the start of the pandemic as lenders looked to reduce their exposure.
Sunak’s officials say the scheme, which will require first time buyers to scrape together a 5% deposit, will be similar in some ways to the previous Help to Buy mortgage scheme and is designed to be its successor.
It will run alongside the existing Help To Buy equity loan scheme which, although also similar, is only for new build homes. It is due to end in 2023.
The government is to become guarantor for part of the loans which will be for properties up to £600,000.
Sunak hopes to use the government’s financial muscle to persuade lenders to re-enter the high LTV mortgage market by taking on some of the financial risk should house price nosedive during a post-Covid recession.
“I want generation rent to become generation buy and these 95 per cent mortgage guarantees help to deliver this promise,” said Boris Johnson over the weekend.
“Young people shouldn’t feel excluded from owning their own home and now it will be easier than ever to get on to the property ladder.”
Some 3,000 buyers are expected to be offered the loans every month. Rightmove has calculated that the loans will cover 86% of properties for sale in the UK.
It is also reported that Sunak’s stamp duty extension, which was leaked last week, is likely to last between six weeks and three months.
But even with a 5% deposit, based on average house prices, Rightmove says many first time buyers will still have to save up considerable sums (see below).
Mark Hayward, Chief Policy Adviser, Propertymark: “A government backed mortgage guarantee scheme will help first time buyers get on the housing ladder at a time when for many owning a home seems an impossible dream.
“Alongside the potential extension of the stamp duty holiday that we have been calling for, this new scheme will go some way in giving some hope to first time buyers at a time when the size of deposits required means they fall at the first hurdle.”
|AVERAGE DEPOSIT BY REGION|
|East of England||£18,199|
|Yorkshire and The Humber||£10,140|