Budget 2021: First-Time Buyers

At MortgagesRM – Fee Free Mortgage Advisor in Doncaster, we look at what the measures on 95% mortgages and the extension of Stamp Duty will mean on First-Time Buyers.

Budget 2021

Last week, Rishi Sunak announced his budget, and talked about the Government’s goal of turning generation rent into generation ‘buy’ . The measures he outlined to help First-Time Buyers had been heavily trailed, even with the extension to the stamp duty holiday he launched last year for England and Northern Ireland, and a new UK Scheme to bring back 95% mortgages.

However, the budget documents have brought more detail. We have looked at the small print to see what the measures will mean for new homebuyers .

How will 95% Mortgage Scheme work?

The COVID-19 pandemic has led to the virtual disappearance of mortgages that only require a 5% deposit – there were only five 95% loan-to-value (LTV) mortgage products available last month compared with 391 in March 2020, and those were specialist deals, according to Doncaster Mortgage Advisor , Stephen Kerrigan.   

The scheme aims to encourage banks and building societies to offer 95% mortgages again. It will do this by giving them the chance to buy a guarantee on the portion of the mortgage between 80% and 95%. If a borrower gets into financial difficulty and their property is repossessed, the government will of course cover that chunk of the lender’s losses.

The new scheme will be open for new mortgages applications in April and will be available until the end of 2022 .

Who could get it?

It’s for any “creditworthy” household struggling to save for a higher deposit. However, these will be standard residential mortgages. So, no second homes or buy-to-lets – and the property has to cost £600,000 or less.

What about the interest rates? What will they be like?

At the moment, 90% LTV mortgage rates are 3% to 3.5%, so we could expect 95% LTV mortgage rates to be between 3.5% to 4%. However, there’s the potential that lenders will adjust 90% LTV rates as well as launching 95% LTV deals, so we could see slightly lower deals coming through.

Stephen Kerrigan, Mortgage Advisor in Doncaster says:

I would expect the 95% products to range from 3.49% to 3.99%, with some going over, depending on length – for example, five-year fixed rates without a product fee.

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