Update on 5% deposit mortgages for first time buyers

Errol Hall, Mortgage Broker in Cricklewood, North London & Saffron Walden, Essex reviews the status of 5% deposit mortgages and how these can support first time buyers entering the market. 

If you are a first-time buyer and would like to find out more about the 95% LTV mortgages, then we recommend you call our Thomas Oliver mortgage broking team on 01707 872000. We will be able to make sure you have the best mortgage advice and access to the most suitable mortgage product to match your circumstances.  

This article provides an update to our original article we published back in April 2021, titled “First-time buyers can purchase their first home with a 5% deposit”.

How does a 5% deposit mortgage work?

In the current financial climate, it has become increasing more difficult for first time buyers to be able to save sufficient money for deposits of 10% or higher. 

The 5% deposit was introduced to help the first-time buyers to be able get on to the property ladder more quickly, as they wouldn’t need to spend the additional time saving.  

Why are the banks now offering 5% deposit mortgages?

Back in April 2021, the UK government introduced a new mortgage guarantee scheme. The scheme is due to run until December 2022. The intention of the scheme was to give lenders confidence to provide 5% deposit mortgages and encourage them to offer new mortgage products. 

The government provides a guarantee that their loan repayments will be covered should there be a change in the housing market that puts their money at risk. 

How long will the offers be available?

The scheme officially finishes in December 2022; however, no one fully knows if the lenders will continue with the offer. There are no indications as to whether the government’s scheme dates will be extended either. So, as the information stands, the government guarantee scheme does come to an end in December 2022. 

Who is offering the 5% deposit mortgages?

Most of the high street lenders are offering 5% deposit mortgages, but their mortgage products will vary, so it is important to gain professional advice to ensure you have the best mortgage product to suit your specific circumstances. 

Please call our Thomas Oliver mortgage broking team on 01707 872000. We will review your circumstances to ensure you have the best mortgage advice and access to the most suitable mortgage product to match your specific needs.  

Changes to the criteria for a 95% mortgage

Initially, these were the criteria that were needed to be met to be eligible for 95% mortgages: 

• The home you are buying must in the UK
• The property must be valued at £600,000 or less 
• The property will not be a new build  
• You will not be able to use the mortgage for a buy-to-let property  
• Your deposit must equal 5% of the property’s overall value 
• You will only be able to have a repayment mortgage as opposed to an interest only mortgage 
• You must be able to pass the lenders affordability criteria  

The new variation to these criteria is that Halifax have announced that they will be providing their 5% deposit mortgage for first time buyers looking to purchase a new build home. 

This is a significant change from the original scheme that did not cover the new build housing market and one that opens up more options for the first-time buyer.

5% deposit mortgages in summary

Errol Hall, Mortgage Broker in Cricklewood, North London & Saffron Walden, Essex said:

“As I have mentioned in this article, there is no guarantee that these mortgage products will still be available after December 2022. Therefore, with the addition of now being able to purchase a new build property with this level of deposit, it would be worth speaking with one of our mortgage advisers to find out if you can benefit from the offer.”