First time buyers to get themselves on property ladder with new mortgage guarantee scheme
FIRST time buyers will be able to get themselves on the property ladder under a new mortgage guarantee scheme.
The plan, which is set to be announced during the budget, will let young people get a mortgage with a deposit worth just 5 per cent of the value of a property.
Under plans to be set out by Chancellor Rishi Sunak, the scheme will attempt to turn “generation rent” into “generation buy”.
Tens of thousands of young people will be guaranteed part of the loans by the Treasury in an attempt to encourage banks to offer riskier mortgages on homes worth up to £600,000.
Most banks stopped offering the 95 per cent loan-to-value mortgages early last year because of the coronavirus pandemic.
Some have begun to offer 90 per cent ones in the past few months, but there are strict rules and very limited availability.
Prime Minister Boris Johnson said: “I want generation rent to become generation buy and these 95% mortgage guarantees help to deliver this promise.
“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.”
Chancellor of the Exchequer, Rishi Sunak said: “Owning a home is a dream for millions across the UK and we want to help as many people as possible.
"Saving up for a big deposit can often be difficult, and the pandemic has meant there are fewer low deposit mortgages available.
“So by giving lenders the option of a government guarantee on 95% mortgages, many more products will become available, helping people to achieve their dream and get on the housing ladder.”
Lenders are fearing that house prices may dip and job losses caused by Covid could push buyers into negative equity.
The new scheme is expected to have a big impact on the housing market, and have been discussing the details with lenders for weeks according to The Times.
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It is understood that the project will replace the Help to Buy scheme created in 2013, which lasted until 2017.
Prime Minister Boris Johnson praised the move in October, saying that he wanted to solve the “generation rent” problem.
