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New 95% LTV Help to Buy scheme to launch

The government will launch a 5% deposit Help to Buy mortgage guarantee scheme on Wednesday.

It will be limited to properties worth up to £600,000, though it will not be restricted to first-time buyers or new builds – like the new version of the equity loan scheme.

Lenders utilising the scheme will offer mortgages fixed for at least five years.

Under the terms of the scheme, banks and building societies will be able to buy a government guarantee to compensate them for a portion of their losses in the event of a repossession.

Chancellor Rishi Sunak said: “Owning a home is a dream for millions across the UK and we want to help as many people as possible.

“Saving up for a big deposit can often be difficult, and the pandemic has meant there are fewer low deposit mortgages available.

“So by giving lenders the option of a government guarantee on 95 per cent mortgages, many more products will become available, helping people to achieve their dream and get on the housing ladder.”

This announcement is similar to the last Help to Buy mortgage guarantee scheme, which was introduced to kickstart the housing market after the global financial crisis but closed for new lending at the end of 2016.

Since then, buyers have only been able to take advantage of the Help to Buy equity loan scheme, which is limited to new build properties.

For new builds constructed after 1st April 2021 a new version the equity loan scheme will introduce regional price caps, while it will only be available to first-time buyers.

Mark Hayward, chief policy adviser, Propertymark, said: “A government backed mortgage guarantee scheme will help first time buyers get on the housing ladder at a time when for many owning a home seems an impossible dream.

“Alongside the potential extension of the stamp duty holiday that we have been calling for, this new scheme will go some way in giving some hope to first time buyers at a time when the size of deposits required means they fall at the first hurdle.”

In the Budget it’s likely there’ll be news about a stamp duty holiday extension, while the government could also allocate more funds to help those living in buildings with unsafe cladding.