5% deposit deals will help unlock property dreams

much more cautious in the tough economy. The new scheme will tackle this by helping borrowers to secure a mortgage with just a 5% deposit to buy a house for up to £600,000.

It will work by enabling lenders to purchase a Government guarantee that would compensate them for a portion of their losses in the event of a repossession. The guarantee will be valid for up to seven years after the mortgage is originated.

Eleanor Williams, a finance expert at Moneyfacts.co.uk said: “Seeking independent and qualified advice may be a wise step for first-time buyers who have a 5% deposit.

“The best mortgage for their circumstances will come down to more than just the rate alone, and when considering a product it’s important to take into account the overall, true cost of the whole deal.

“This means balancing costs such as any fees, with any possible incentive packages the borrower may benefit from, against the initial rate.”

Some experts also suggested borrowers could be better off by trying to stretch to a bigger deposit.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “While rates on 95% products are looking more competitive as more lenders enter the market, it is worth noting that if there is an option to find another 5% deposit, then rates at 90% LTV start from 3% for a two-year fix and 3.3% for a fiveyear fix.” Miles Robinson, head of mortgages at online mortgage broker Trussle, said: “Mortgage rates available to those with a 25% deposit can be around 1.19%.”

Housing Secretary Robert Jenrick said: “One of the biggest divides in our country has been between those who can afford their own home and those who cannot.

“That’s why we are determined to do everything we can to help hardworking families and prospective first-time buyers get their feet on the housing ladder in an easy and affordable way, to level up this country.”

The scheme will be open for applications until December 31 2022.