In a previous blog post, I mentioned that conveyancers have a couple of busy months ahead of them as indicated by data from Rightmove.

The property market continues to boom, fuelled to some extent by actions taken by the Government, mostly debated the SDLT holiday extension (there are also a lot of other factors at play). However, another initiative launched by the government that plays its part is their part guarantee of 5% deposit mortgages.

So what are they and what do you need to know?

What are the 95% LTV Government guaranteed mortgages?

With the pandemic striking many lenders stopped offering mortgages with only 5% deposits, also known as 95% LTV mortgages.

To stimulate the market the Government has agreed to guarantee part of the mortgage to ensure lenders feel comfortable offering these products again. The guarantee from the government is only partial, generally guaranteeing 15% of the value if the borrower defaults on mortgage payments, meaning the risk for lenders is capped at 80% LTV.

The scheme was announced in the budget coming into effect from April 2021.

The mortgages are available for;

  • Main residential properties - excludes buy-to-let, and second homes
  • Properties with a value of up to £600,000
  • Open to existing homeowners, not just first time buyers

Why was the government mortgage guarantee introduced?

The scheme was introduced to help more lenders offer 5% deposit mortgages again after supply dried up due to the uncertainty of the COVID-19 pandemic. The government wants to help people stuck renting onto the property ladder.

In light of increasing property prices saving up to a 10% deposit has proved a struggle for many first time buyers. The scheme will most certainly help first time buyers, but will likely further fuel property prices to increase.

Which lenders offer these 95% LTV products?

Generally all the normal high street bank names - Santander, LBG, Barclays, Natwest, and HSBC among others, and with more to come with time.

New build exemptions

Some lenders, such as Halifax and Barclays, will not offer mortgages under the scheme for new build houses.

Impact on the property market

The availability of these products is likely to drive demand from buyers who were priced out of the market when they became hard to get by. It might also push prices up even further as buyers might have more “wiggle room” in their budgets.

This scheme together with other actions taken by the Government is sending strong signals that they want to protect and support the housing market. They are also showing great interest in continuing to support the people to move onto the property ladder, not only with this specific initiative but also the recently introduced non-UK resident surcharge for SDLT.

Generally, this is good news for conveyancers as it means we are likely to continue to have new business coming in for the foreseeable future. However, with an already hot property market with huge caseloads, it might put even further pressure on conveyancers.

Make sure your teams are well looked after and workloads are balanced to avoid unnecessary stress and potential burn-out. The property boom is far from over.

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