High street banks will today begin offering mortgages with a deposit of just five per cent under a new government-backed scheme.
The scheme, first announced in the Budget, is designed to make home ownership more affordable for first-time buyers.
Borrowers will be able to secure a mortgage with just a five per cent deposit on homes up to a value of £600,000.
The government will provide the lenders with the guarantee they need to cover the other 95 per cent, subject to the usual affordability checks.
High street lenders Lloyds, Santander, Barclays, HSBC and Natwest are all offering the mortgages from today, with Virgin Money set to join the scheme next month.
However, some lenders have said they will not offer the mortgages on new-build properties.
“Every new homeowner and mover supports jobs right across the housing sector, but saving for a big enough deposit can be hard, especially for first time buyers,” said chancellor Rishi Sunak.
“By giving lenders the option of a government guarantee on 95 per cent mortgages, many more products will become available, boosting the sector, creating new jobs and helping people achieve their dream of owning their own home.”
The scheme is the latest in a string of measures aimed at providing flexible home ownership options to help buyers get on the property ladder, including the Help to Buy and Shared Ownership schemes.
But it comes as UK property prices continue to rise to record levels, making it harder for first-time buyers to stump up the deposit needed to own a home.
“The sales market shows no sign of slowing down, with buyers still motivated by a combination of the Stamp Duty holiday, the easing of lockdown restrictions and the search for homes that match their revised housing requirements in light of the changes brought about by the coronavirus,” said Nick Barnes, head of research at Chestertons.
“The market is likely to receive a further boost with the commencement of the government’s new Mortgage Guarantee scheme which lenders will operate from today.”