New 95% mortgage scheme has an instant positive impact

The number of 95% loan-to-value (LTV) mortgages has increased significantly in the last week, helping to fuel fresh demand for property.

The new government-backed 95% mortgage guarantee scheme was introduced last Monday to support the housing market post-lockdown.

The government’s scheme to support 95% mortgages aims to keep the residential market active after the withdrawal of the stamp duty holiday on 30 June.

The Help to Buy scheme only supports first-time buyers buying a new home. It appears that Chancellor Rishi Sunak has noted that to keep the housing market alive buyers, need to be able to buy ‘second hand’ housing.  Families moving to larger homes and retirees downsizing all need buyers too which would frequently be those who are already homeowners and in need of a mortgage.

It is not only the current home-owners who benefit from an active housing market. A significant fall in activity in this, the largest element of the housing market, impacts on many businesses. Estate agents, surveyors, conveyancers, furniture and home furnishing retailers, their supply chains as well as local builders all depend on an active housing market.  These businesses all contribute in turn to our local economy, providing jobs and generating money that is spent on services and in shops, restaurants and leisure venues.

Anyone buying a family home can apply for a 95% mortgage, but it is first time buyers who are expected to be the major beneficiaries of the Governments guarantee scheme due to the well detailed problems of saving for a deposit while paying rent.

The ability to access a 95% mortgage almost completely disappeared in 2020. The government’s scheme, which provides a guarantee for up to 15% of a loan, was designed to increase the number of mortgage providers in this market and has already had a positive impact.

The number of 95% mortgage products available has increased from just three a couple of months ago to over 60 available from major high street lenders in the last week. Not many government initiatives have such immediate, positive results.

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