This will, in theory, grant more people access to the property ladder
Rishi Sunak has unveiled a 5 per cent deposit scheme for first time property buyers as part of his 2021 Budget.
Usually, buying a property requires a much larger deposit, usually north of 15%. That has proved a big obstacle for generation rent, whose wage stagnation, combined with inflating house prices, has cast them further and further away from getting into the property game.
However this new 5 per cent deposit scheme will go some way to bridging that gap, though many will argue it is a sticking plaster over a more systemic economic issue.
The new scheme means lenders will be able to provide mortgage loans to cover 95 per cent of a house price.
Prior to this, most mortgage lenders only allowed buyers to borrow 4.5 times their salary, meaning you’d have to earn over £40k a year to get a mortgage on a house worth around £200,000.
But with Lloyds, Natwest, Santander, Barclays and HSBC among the banks on board with the scheme, and hopefully more to follow, the number of people able to access mortgages will increase.
The Chancellor said: “Even with the stamp duty cut, there is still a significant barrier to getting people on the housing ladder – the cost of a deposit.
“So, I’m announcing today a new policy to stand behind homebuyers: a mortgage guarantee.”
Boris Johnson said recently: “I want generation rent to become generation buy and these 95 percent mortgage guarantees help to deliver this promise.
“Young people shouldn’t feel excluded from the chance of owning their own home and now it will be easier than ever to get onto the property ladder.”
Minimum wage will also increase as part of this budget. Workers aged 23 and over will see their hourly wage increase to £8.91 from the start of April.
