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RISHI Sunak has confirmed first-time buyers struggling to secure a mortgage are able to get on the property ladder with just a 5% deposit.

The Chancellor unveiled the scheme in today’s Budget, which will see the government back mortgages for buyers with a deposit of just 5% on homes worth as much as £600,000.

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Rishi Sunak announced the mortgage guarantee scheme in today's budget
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Rishi Sunak announced the mortgage guarantee scheme in today's budgetCredit: Getty Images - Getty

It means that if the borrower is unable to pay one month, the state will pick up the bill - although it is highly likely there will still be repercussions for borrowers if this happens.

The scheme will slash the minimum amount first-time buyers need to purchase their own home in half.

House buyers will need just a £10,000 deposit - instead of £20,000 - to be able to afford a £200,000 home.

It will launch next month and will be available for new mortgages up to December 31 2022.

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All buyers can fix their initial mortgage rate for at least five years if they choose to do so.

Mr Sunak announced that a number of the UK's largest lenders including Lloyds, NatWest, Santander and Barclays will be offering the mortgages from next month.

Other banks, including Virgin Money, would offer the loans "shortly after", he added.

He said: "I’m announcing today a new policy to stand behind homebuyers: a mortgage guarantee."

What is the Budget?

THE Budget is when the government outlines its plans for tax hikes, cuts and things like changes to the minimum wage.

It's different to the Spending Review, which sets out how much public cash will go towards funding certain departments, devolved government's and services, such as the NHS.

The Budget is read out in the House of Commons by the Chancellor of the Exchequer. It will be Rishi Sunak's second Budget as Chancellor.

Mr Sunak's first one in March last year has been dubbed the "coronavirus Budget" after it focused on supporting Brits financially through the crisis, rather than the government's "levelling up" agenda as promised in the 2019 general election.

Normally, the Budget is held once a year but the unprecedented circumstances of the pandemic in 2020 saw Mr Sunak give a "mini-budget" in the Commons on July 8

Mr Sunak said the policy would give people who can’t afford a big deposit the chance to buy their own home.

He added: "As the Prime Minister has said, we want to turn Generation Rent into Generation Buy."

It marks a boost for Brits struggling to scrape together savings to buy their own home, as these types of mortgages are deemed riskier by banks.

Currently, there are only a handful of 5% deposit mortgages available, pushing up costs for buyers who are more likely to get a deal with a 10% deposit or bigger.

Many lenders pulled these mortgages in the wake of the coronavirus pandemic - there were just eight with a 95% loan-to-value (LTV) in January, 2021, according to the Treasury.

The move has seen many young buyers locked out of the property market as they compete with a surge in house prices that outstrips wages.

The mortgage guarantee scheme was first mentioned at the virtual Conservative party conference last year.

The Prime Minister outlined his plans to turn “generation rent” into “generation buy”, and said the scheme could help fix the “broken housing market” that had taken a blow due to Covid.

Online mortgage broker Trussle chief executive Ian Larkin said the Government's mortgage guarantee scheme was "welcome news for buyers", especially because it's not restricted to new builds.

But he said there could be a "danger" that the scheme would increase demand and inflate house prices.

He added: "Additionally those earning lower salaries, as well as those living in areas where house prices are high, still may not pass lender affordability requirements to get a higher loan, despite having a 5% deposit."

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You can find out all the Budget announcements made today on The Sun's Budget live blog.

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