Joy and caution at return of the 95% mortgage

A “mortgage guarantee” unveiled by the Chancellor is likely to provide a “timely boost” for thousands of home buyers.
The announcement of 95% mortgages has been hailed a boost for homebuyersThe announcement of 95% mortgages has been hailed a boost for homebuyers
The announcement of 95% mortgages has been hailed a boost for homebuyers

Lenders who provide mortgages to homebuyers who can only afford a 5 per cent deposit will benefit from a UK government guarantee on those loans. It should help first-time buyers with small deposits get a foot on the property ladder.

The incentives to major lenders, many of whom are already on board, effectively brings back 95 per cent mortgages, which have virtually disappeared during the pandemic.

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Greig Brown, mortgage operations director at Scottish legal firm and estate agent Aberdein Considine, said: “The introduction of the new 95 per cent mortgage guarantee scheme by the Chancellor is extremely welcome and will provide a timely boost for thousands of home buyers who have been locked out of the market for a year with lenders looking for 10 per cent or 15 per cent deposits.”

As expected, Rishi Sunak also extended the stamp duty holiday in England for properties less than £500,000 until the end of June, then a new £250,000 threshold will apply until the end of September before the £125,000 starting point is reintroduced. Scotland has a separate Land and Buildings Transaction Tax (LBTT) system.

Colby Short, founder and chief executive of, said: “If the current stamp duty holiday is the cherry on top in terms of property market incentives, then the announcement of government-backed 95 per cent mortgages is most certainly the cake. It should go a long way in helping a lot of hard-pressed homebuyers get that first foot on the ladder by considerably lowering the initial cost of securing a mortgage.

“However, like all sweet treats, it should come with a health warning. Borrowing beyond your means is a short cut to financial difficulty and while many will be tempted to do so given the lower initial cost of buying, it’s important to remember that a property purchase is an expensive, long-term commitment.

“Particularly if you find yourself on a variable rate mortgage, it can be a slippery slope where monthly repayments are concerned as soon as interest rates start to creep up again.”

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