Low Deposit Mortgages

Date Posted:
January 13, 2023

During 2020, the global pandemic saw low deposit mortgages become almost non-existent on the market due to the higher risk to lenders. Anyone wanting to purchase a home were forced to save further or rely on help from friends and family. This had a particular impact on first time buyers, who as a group, had relied heavily on low deposit mortgages.

In April of last year, the government launched the mortgage guarantee scheme to help buyers with small deposits to get onto and move up the property ladder. This initiative, launched in April 2021, was designed to encourage lenders to offer 95% loan to value (LTV) mortgages for properties worth up to £600,000 by offering a guarantee to participating lenders to cover some of the mortgage over 80%. This guarantee was to give lenders the confidence to reintroduce low deposit mortgages back onto the housing market.

The government guarantee will be valid for up to seven years after securing the mortgage and lenders will offer mortgages with fixed interest rates for at least five years to provide more security to buyers. With the Bank of England expected to raise the base rate further in February, however, now would be the time to take advantage of this scheme and the lower interest rate. However, the scheme will be open for new mortgage applications until December 2022.

So, who is eligible for the mortgage guarantee scheme?

The mortgage guarantee scheme is similar to the Help to Buy equity loan scheme but there are different eligibility requirements, so to find out if you would qualify for a 95% LTV mortgage then we have listed the eligibility criteria below:

  • Property value must be less than £600,000
  • It covers all properties, not just new build homes
  • Mortgages will be offered subject to the lender’s usual affordability checks
  • You can only take out a repayment mortgage using the scheme as there will be no interest-only options
  • It can only be used by individuals and not businesses
  • Cannot be used for buy-to-let properties
  • You do not have to be a first-time buyer

I don’t qualify, what are my options for a low deposit mortgage?

Although this the mortgage guarantee scheme is a government initiative, lenders are not required to offer it, however, most big banks and building societies resumed low deposit mortgages in 2021 and are expected to continue these offers through 2022, despite the housing market due to slow down slightly thanks to inflation and increased interest rates. However, there is still a lot of caution from lenders, and this has been reflected in higher mortgage rates, so larger deposits are still recommended if you can.

If you are looking for a low deposit mortgage, especially if you are a first-time buyer, then you should always consult a mortgage broker such as Property Link Homes. They can access around 98% of lenders and get exclusive rates and deals that would not be available by going directly to the lenders. This means they can help find you a low deposit mortgage deal that will work to accommodate your circumstances.*

We advise speaking to one of their experienced and friendly staff to get the best advice and to help better understand your mortgage options. If you are interested in how they can help you with low deposit mortgages, then please contact their expert team today.

*As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.

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