Since the 2008 Financial crisis, low-deposit mortgages have virtually disappeared says the treasury. However, with news about the vaccine rollout and the end of Lockdown at the end of the tunnel, is low-deposit mortgages about to make a comeback?
Chancellor, Rishi Sunak is expected to unveil a mortgage guarantee scheme that aims to help First-Time Buyers get their foot in the door on the ever-struggling property ladder in this week’s budget. He is attempting to incentivise lenders to provide mortgages to First-Time Buyers, along with current homeowners, with deposits as low as 5% on properties worth up £600,000.
The Government will offer lenders the guarantee they need to provide mortgages covering the remaining 95%, with details set to be unveiled on Wednesday. However, the scheme will be subject to standard affordability checks, and is expected to launch in April this year.
Yes, low-deposit mortgages have virtually disappeared from existing due the financial impact of the coronavirus pandemic, but the treasury mentioned to Prime Minister, Boris Johnson that they wanted the generation who are currently on the market renting properties to become homeowners.
The Prime Minister also encouraged that young people shouldn’t feel excluded from the chance of owning their own home, and now it will be easier than ever to get onto the property ladder.
Sunak’s scheme is based on the original Help-to-Buy mortgage programme introduced to kick start the housing market following the 2008 financial crash, and it was estimated to have helped sell more than 100,000 homes in the UK.
Mortgage Advisor in Doncaster, Stephen Kerrigan said:
Owning a home is a big dream for thousands of people across the UK, and the government want to help as many people as possible to make their dream a reality. Saving up for a big deposit can be often difficult, and the pandemic has meant there are fewer low deposit mortgages available.
However, the entire country is in far more debt than we’re used to, which is causing enormous strain. In attempt to support the UK’s economic recovery and tackle the high unemployment rate as the furlough scheme comes to an end, the corporation tax is expected to be increased from 19% to about 23%, and capital gains tax will also rise.
These changes will be phased in after Lockdown has been lifted further in May/June 2021. This means more spending, more debt piling up. Sunak has to start preparing for how he’s going to get the debt under control, and how he’s going to return the burden of debt to normality.