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The return of mortgages with 5% deposits!

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The return of mortgages with 5% deposits!

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So its been a while since there have been decent options on the market for buyers with a low deposit. 
The chancellor is set to announce a new government backed scheme foe 95% LTV mortgages which will be available from April. 
Is this as good as it sounds for first time buyers? 
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  • edited 27 February at 9:31AM
    K_SK_S Forumite
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    edited 27 February at 9:31AM
    @goingon30 It sounds like the old Help to Buy mortgage guarantee scheme.

    Definitely good news for prospective buyers with 5% deposits as there don't appear to be any limitations with regard to the property type, the max price is rumoured to be a very generous £600k and there should be none of the admin associated with the other government schemes.

    To the broker and the buyer, it should be just like other mortgage products.

    https://www.bbc.co.uk/news/uk-56218952

    I am a Mortgage Adviser

    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.

  • MattMattMattUKMattMattMattUK Forumite
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    From a fiscal viewpoint it makes little sense, from an economic perspective it is a bad idea as it will further distort an already distorted market and extend a bubble, from a practical perspective it makes no sense as it is just delaying the inevitable market correction, however it will be popular amongst some and will poll well with those who are in a position to take advantage of it, so despite being a bad policy it will go ahead. 
  • amandacatamandacat Forumite
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    It’s a good idea to get people on the housing ladder, I know so many who pay extortionate rental prices because they cannot afford to save a 10% deposit to get on the property ladder. 
    It will also widen options as many FTB only have HTB or shared ownership as options, which are often new builds and leave them in negative equity for at least a few years.
    The disadvantage is it might push house prices up further and prices are already out of reach for so many. 

    House buying timeline: (Already sold/staying with family)

    8.2.21- offer accepted on no chain property 
    10.2.21- solicitors instructed and EA sent memo of sale
    22.2.21- broker submitted full mortgage application 
    26.2.21- mortgage offer received 
    4.3.21- solicitor letter received confirming content of my mortgage offer and that searches had been applied for
    8.3.21- received property information form, fixture and fittings form and land registry plan. 

    31.3.21-Home buyers report undertaken. No issues on survey and they agreed that it was worth the intended purchase price

    6.4.21-Solicitor update to say still awaiting response to some enquiries

    17.4.21-Letter received from solicitor with overview of findings so far with enquiries/respect of the property

    24.4.21-Letter confirming searches back and content of searches, solicitors advise once final two enquiries are answered we can agree exchange dates

    29.4.21-Chased solicitor to see if final enquiries are back, they advised they are still not. Spoke to EA who spoke to seller's solicitor and they said that they have had fresh new enquiries to answer from our solicitor and not to expect to hear until w/c 17th May. Conflicting info between both solicitors!

    5.5.21-Contract/mortgage deed/land registry forms received for signing. Still no mention of these outstanding enquiries.

    8.5.21- signed paperwork above posted 

    12.5.21-Phoned solicitor, they have the signed forms but confirmed the seller's solicitor still haven't replied to the final enquiries

    14.5.21-Final enquiries returned, completion date set for 21.5.21


  • MWTMWT Forumite
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    Paired with the end of the SDLT holiday I'd hope it simply softens the impact of that rather than drives prices higher over-all.
    To make use of a 95% mortgage the borrowers will need the income to support that so it still leaves a place for HTB equity loans, and you also have to consider the impact of 5% deposits on chains so this will probably still skew mostly towards new builds. 
  • edited 27 February at 10:22AM
    K_SK_S Forumite
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    edited 27 February at 10:22AM
    MWT said:
    Paired with the end of the SDLT holiday I'd hope it simply softens the impact of that rather than drives prices higher over-all.
    To make use of a 95% mortgage the borrowers will need the income to support that so it still leaves a place for HTB equity loans, and you also have to consider the impact of 5% deposits on chains so this will probably still skew mostly towards new builds. 
    @mwt I see your point but (as far as I can remember) that wasn't my experience from the last time we had 95% LTV mortgages propped up by the government under the H2B mortgage guarantee scheme. 

    I am a Mortgage Adviser

    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.

  • csgohan4csgohan4 Forumite
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    amandacat said:
    It’s a good idea to get people on the housing ladder, I know so many who pay extortionate rental prices because they cannot afford to save a 10% deposit to get on the property ladder. 
    It will also widen options as many FTB only have HTB or shared ownership as options, which are often new builds and leave them in negative equity for at least a few years.
    The disadvantage is it might push house prices up further and prices are already out of reach for so many. 
    On the reverse side, the safety net of the LL , repairing your place (hopefully), you will now be responsible for all repairs. If you are unable to save for a deposit, even 5% is of concern as saddling your self with even more debt, i.e mortgage won't suddenly make your money grow faster. 

    Rents are generally more expensive than a mortgage for some, but repairs and maintenance are not to be taken lightly. Boilers, roof repairs, general e.t.c are not cheap. 
    "It is prudent when shopping for something important, not to limit yourself to Pound land/Estate Agents"

    G_M/ PIxie/ Bowelhead99 RIP
  • MWTMWT Forumite
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    K_S said:
    MWT said:
    Paired with the end of the SDLT holiday I'd hope it simply softens the impact of that rather than drives prices higher over-all.
    To make use of a 95% mortgage the borrowers will need the income to support that so it still leaves a place for HTB equity loans, and you also have to consider the impact of 5% deposits on chains so this will probably still skew mostly towards new builds. 
    @mwt I see your point but (as far as I can remember) that wasn't my experience from the last time we had 95% LTV mortgages propped up by the government under the H2B mortgage guarantee scheme. 
    It probably depends how far back your memory goes :smile:
    ... but yes you are probably right, people will figure out how to handle the gap, as long as the chain is well motivated.
    I do see it as a good move though in so far as it allows people who only have a 5% deposit but otherwise do not need the equity loan to leave that complexity out of their futures, but at a cost as I expect we will see on the interest rates...

  • DandytfDandytf Forumite
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    This 95% availability, could provide future incentive, to start another 25 years.
    Unless it's going to be Gov time limited and withdrawn after a few months.
    Replenished CRA Reports.
    Mid 2018 Help2save 50 uk pounds per month
    H.L. Active -Charter Savings .41% 25 u.k. pounds.
  • Good for banks, good for young couples renting together on average salaries, good for the property market.  Happy days
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