Mortgage guarantee to help buyers with 5% deposit

The UK Government is to announce a new scheme which will allow all property buyers access 95% mortgages.

A new guarantee scheme to help people with small deposits get on the property ladder is set to be announced at next week's Budget.

It is not restricted to first-time buyers or new-build homes, but there will be a £600,000 limit.

The government will offer incentives to lenders, bringing back 95% mortgages which have "virtually disappeared" during the pandemic, the Treasury said.

Chancellor Rishi Sunak says he will use the Budget to level with people about the pandemic's impact on the economy.

The chancellor will unveil his Budget, including the mortgage scheme, in a Commons speech on Wednesday.

Dream

Mr Sunak said: "Owning a home is a dream for millions and we want to help as many people as possible."

Boris Johnson said he wants "generation rent" to become "generation buy".

The coronavirus pandemic has meant there are few low-deposit mortgages available, the Treasury said, with just eight on the market in January.

Low-deposit mortgages are often seen as riskier by banks as they are more vulnerable to negative changes in property prices - meaning people hold more debt than their home is worth.

Under the new scheme, which will launch across the UK in April, the government will offer to take on some of this risk. It is understood that lenders will pay around 1% of the mortgage value to secure the government guarantee.

The latest scheme is based on the Help to Buy mortgage guarantee scheme, which was introduced under David Cameron's government in 2013.

The Treasury said that policy "reinvigorated the market for high loan-to-value lending after the 2008 financial crisis" and enabled 100,000 households to buy a property across the UK.

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