The Government Backed Mortgage Guarantee Scheme – Good News for Home Buyers
In December 2020 the Bank of England published a report confirming what most potential homebuyers already knew, that saving for a deposit represents the biggest obstacle to buying their dream home.
During the course of the Coronavirus pandemic mortgage lending has stood up remarkably well with more mortgages approved in November 2020 then in November 2019. However, the number of products available for customers who were unable to find at least a 10% deposit had dramatically reduced or products were only available on unaffordable terms.
The government has been working hard to keep the housing market going through the pandemic introducing the Stamp Duty Land Tax holiday last summer which has been extended in the March budget until the end of June, and then in a reduced form until the end of September 2021.
To supplement the SDLT holiday, in the March 2021 budget, the government announced a mortgage guarantee scheme which came into force on 19th of April. The scheme will provide a government guarantee to compensate the lender for losses in the event of default by the borrower. The intention of the scheme is that it will give lenders the confidence to provide mortgage products on favourable terms to borrowers who can only raise a 5% deposit. The scheme will be available until December 2022 and will be available to new and existing borrowers on residential purchases in the UK up to £600,000. Second homes and buy-to-let properties are excluded from the scheme. The borrower must be able to provide a deposit of between 5 and 10% of the purchase price.
The scheme applies to existing properties and new-builds. Early signs are that several of the High Street lenders have joined up to the scheme. Lloyds, Santander, Barclays, HSBC and NatWest have offered products from day one. Other lenders will be joining in the next few weeks. However, some lenders, such as the Halifax, which is part of the Barclays group, have indicated that their product will not be available on new-build homes.
Gardner Croft is on the Solicitors Panel of most High Street lenders so our lawyers are ideally placed to advise clients on their purchases and mortgages.
For specialist advice on moving home or buying or selling an investment property, please contact our residential property solicitors at Gardner Croft, the Canterbury law firm.