Government-guaranteed mortgages: What they really mean for your clients

Peter Joseph is chief executive at The Moving Hub

The launch of the brand-new, low-deposit mortgage scheme is set to see many prospective homebuyers benefit over the coming months.

The Prime Minister’s pledge to turn “generation rent” into “generation buy” was echoed by Chancellor, Rishi Sunak, during his speech at the Spring Budget.

In his address to Parliament, he announced a new 5% deposit mortgage scheme. Loans for 95% of the purchase price will be guaranteed by the government, on properties up to the value of £600,000.

These new mortgage products will be available to both first-time buyers and existing homeowners. Unlike the similar Help to Buy scheme, these loans will not be exclusive to new build properties. Under the new scheme, however, banks will not lend against new build homes.

Mr. Sunak confirmed that some of the biggest lenders including HSBC, NatWest, and Barclays, will launch their products, with more to follow. The scheme will run from April until 31st December 2022 and will likely avert some of the fall off when the stamp duty holiday concludes.

How will the government-guaranteed mortgages affect your clients?

Barclays has already introduced their first guaranteed mortgage products, along with NatWest and Santander, to name just a few. Although products under the new scheme are just reaching the market, 95% deals have proven to be extremely popular in recent months.

Particularly for first-time buyers, getting on the property ladder often hinges on saving for a deposit. People looking to get on the property ladder stand to benefit the most from the government-guaranteed 5% deposit mortgages.

For many of your clients, a mortgage such as these may appear to be a tempting prospect in the short-term.

However, a smaller deposit requires a larger mortgage. Often, these come with a higher rate than a mortgage offer requiring a larger deposit. It is important for your clients to consider their options, to make sure they are truly getting the best deal for them. If savings are at a minimum, then one of the government’s guaranteed mortgage deals might be the best option.

But if your clients can afford a larger deposit, that may be of most help to them in the long run.

Key points to consider:

Confidence continues to grow in the market, and the launch of the government-backed mortgage scheme will help it increase further. The Prime Minister’s vow to help renters become homeowners is moving forward and restoring hope to many.

Although we expect there will be a rise in enquiries about the new 95% loan-to-value mortgage offers, it remains essential for your clients to consider all their options.