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Budget 2021: Big banks poised to launch 95% government-backed mortgages

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Written by: Victoria Hartley
03/03/2021
Chancellor Rishi Sunak confirmed plans to launch another government-backed 95% Help to Buy mortgage guarantee scheme in the Budget, open to all buyers.

The scheme will be open to home buyers with a 5% deposit, not just first-time buyers, for properties worth up to £600,000. It has been largely modelled on the previous Help to Buy scheme launched in 2013 to help lenders transition back in to the market, and is open to second hand properties not just new-build.

Sunak confirmed the UK’s biggest banks are poised to lend on the scheme from mid-April, include Lloyds, NatWest, Santander, Barclays and HSBC with Virgin Money readying to launch in May.

All mortgages will need to be repayment, not interest-only on a loan to value of between 91 to 95% and are subject to the usual affordability rules. All participating lenders will also be required to offer a five-year fixed rate product as part of its guaranteed range of mortgages.

He said: “To quote the prime minister, we will turn generation rent into generation buy.”

HSBC’s head of buying a home, Michelle Andrews, said: “We’re delighted to once again be supporting the Government Help to Buy scheme. Here at HSBC UK we’re committed to supporting people to get on to, or move up the property ladder. This scheme will make a real difference in enabling more first-time buyers and home movers, with a minimum of 5% deposit, to get the keys to their new home, and we’re excited to play our part in it.”

A Santander spokesperson said it had no product details yet but they would be available through intermediaries, branches and over the phone.

Mortgage broker, Hiten Ganatra, Visionary Finance said: “The mortgage guarantee scheme will help open up options within the second hand property market and it’s incredible that so many lenders are already on board and will be rolling out products by April.”

He added: “The key to success of the guarantee scheme will determined by the competitiveness of the mortgage rates being offered to those looking to use it.”

Stock market-listed mortgage broker firm Mortgage Advice Bureau is already listing the product on its website.

The scheme will be open for new mortgage applications from April 2021 to December 2022, reflecting the government view that the scarcity of high loan-to-value lending is primarily a response to the pandemic rather than a more structural problem.

The government will review the continuing need for the scheme towards the planned end date and has capped the bill for the scheme at £3.9bn.

Fears remain that the already hot property market with rising house prices driven up by the Stamp Duty Land Tax (SDLT) holiday, which has been extended today, could be driven ever-higher after this move.

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