THE RETURN OF THE 95% MORTGAGE

COVID ALL BUT WIPED OUT SUPER-LOW DEPOSIT HOME LOANS. SO WILL NEW GOVERNMENT-BACKED DEALS BE THE SOLUTION FOR STRUGGLING WOULD-BE BUYERS? ROSIE MURRAY-WEST REPORTS

CHANCELLOR Rishi Sunak’s government-backed 95 per cent mortgage scheme, announced in the Budget last week, will allow many people who have not been able to save a ten per cent deposit to access home loans. There was more good news – with the much-called for extension to the stamp duty holiday.

For Britain’s would-be home movers and first-time buyers, there are decisions to be made and many questions to ask. Is a five per cent deposit scheme too risky? Does this stimulus mean that I’ll just be buying a home at an over inflated price? What happens if I still cannot get my purchase completed by the new stamp duty deadline on June 30?

Ninety-five per cent mortgages do not sound like such an outlandish idea and indeed, they have been a common feature of the housing market. Before the financial crisis of 2007 it was even possible to get a 110 per cent mortgage, leaving you extra cash to spend on furniture. A few 95 per cent deals are even available now, in advance of the launch of the government deal next month, though they come with strings attached.

When the coronavirus crisis hit, however, many lenders pulled 95 per cent deals, fearing that new home owners would lose their jobs and be unable to pay the mortgage, or that the market would crash.

Under the Chancellor’s new guarantee scheme, the Government will act as a safety net for lenders to incentivise them to offer these lowdeposit mortgages.

Brian Murphy, head of lending at broker the Mortgage Advice Bureau, explains that the scheme comes with some restrictions.

For a start, only properties worth up to £600,000 can be bought with a five per cent deposit and you will still have