Ultra-low deposit mortgages are set to make a comeback with a new 5% deposit home loan guarantee system.
Details of the new program are expected to be presented in Chancellor Rishi Sunak’s budget on Wednesday.
The program will be available to current homeowners as well as first-time buyers looking to buy a home up to £ 600,000.
The initiative will be available to lenders from April and is designed to increase the appetite of mortgage lenders to offer high value loans to creditworthy customers across the UK.
Under this program, the government will offer to take on some of the risk of low deposit rate loans, which means that lenders would have some protection against potential losses.
Low deposit rate loans are often viewed as riskier, as borrowers could end up with negative equity if house prices drop, meaning they owe more than their property’s value.
Lenders will be able to purchase a government guarantee that compensates them for a portion of their losses in the event of foreclosure.
All lenders under the program will offer fixed mortgages for at least five years as part of their product line, providing options for consumers with smaller deposits who want the security and predictability of a home mortgage loan. longer term fixed rate.
The new initiative follows in the footsteps of the UK-wide Help to Buy mortgage guarantee program, which was launched in 2013 and helped revitalize the market after the 2008 financial crisis.
This program, which also offered 5% deposit mortgages, is no longer in effect.
He has helped over 100,000 households across the UK buy homes, but he has also been accused of driving up house prices.
Many low deposit mortgages disappeared from the market last year due to concerns about the wider economy.
However, more recently, lenders have brought down low deposit agreements, clustered around the 10% deposit level.
For example, the Yorkshire Building Society on Wednesday launched two new 10% mortgages intended exclusively for first-time buyers.
In recent months, house prices have hit record highs, fueled by buyers wanting to relocate to change their lifestyle, as well as a temporary stamp duty holiday.
The stamp duty holiday is due to end on March 31, but it could be extended for another three months in the budget, according to recent reports.
Rightmove estimates that 100,000 buyers who accepted a purchase last year will lose if the deadline remains on March 31.
In total, he estimates that an additional 300,000 real estate deals in England could be successful if the deadline is extended until June, saving buyers £ 1.75bn in total.
Rightmove real estate expert Tim Bannister said: “We estimate that around 100,000 sales will miss the current March deadline, and so if the holidays are extended until the end of June, it would give them the opportunity to complete on time, as well as a number of other sales. could now get by, which was only agreed at the start of this year.
Kate Eales, head of the regional residential agency at Strutt & Parker, said a possible extension “is likely to motivate potential buyers who thought they were entering the market but who might have been put off by the foreclosure restrictions and felt they had already missed the boat with these vacations. absolutely”.
She added: “An extension, combined with the government’s recent roadmap to normalcy, is likely to work together to encourage more to come to the market and enjoy the holidays.”
Prime Minister Boris Johnson has previously said: “I want Generation Rent to become a Generation Buy and these 95% mortgage guarantees help keep that promise.
“Young people shouldn’t feel left out of the opportunity to own their own home and it will now be easier than ever to climb the ownership ladder. “
Mr. Sunak previously said: “By offering lenders the option of a government guarantee on 95% mortgages, many other products will become available, helping people to realize their dreams and move up the housing ladder. “