5% deposit scheme for homebuyers
Many people working in the conveyancing industry would think that the last thing the conveyancing market needs now is another government scheme to breathe fire into an already overheated market. The SDLT 'holiday' announced by the Chancellor during 2020 has caused unprecedented demand and work levels for everyone connected with the conveyancing process.
Thus, the announcement of a new government backed mortgage scheme on 19 April 2021 will no doubt have raised some eyebrows.
The new scheme aims to help people with a 5% deposit get onto the housing ladder. The scheme will help first-time buyers or current homeowners secure a mortgage if they have a 5% deposit to buy house of up to £600,000. The aim of the scheme is to provide 'an affordable route to homeownership for aspiring homeowners'.
The government will offer lenders the guarantee they need to provide mortgages that cover the remaining 95% of the purchase price (subject to the usual affordability checks). The scheme is available from a number of lenders including Lloyds, Santander, Barclays, HSBC and NatWest.
The government will provide lenders with the option to purchase a guarantee on the top slice of the mortgage. In other words, the government will compensate the mortgage lender for a portion of the net losses suffered in the event of repossession. The guarantee will be valid for up to 7 years after the mortgage starts. The scheme is intended to be a temporary measure and will be open for new mortgage applications from April 2021 to December 2022. The government will keep the scheme under review.
The scheme is described as a 'mortgage guarantee scheme' and those wishing to take advantage of it should make their conveyancer aware that they intend to use the scheme at the earliest possible opportunity to ensure, so far as possible, a smooth transaction.
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