Major British lenders—including Lloyds, NatWest, Santander, Barclays and HSBC—are in support of a government mortgage guarantee scheme designed to help people with small deposits to buy a house.
The assistance programme offers to fully guarantee mortgages issued to homebuyers who can only afford a 5% deposit.
The scheme was part of the budget presented yesterday in the house of commons by the Chancellor of the Exchequer, as Britain recovers from the Covid-19 pandemic.
In his statement before the lower house in the Parliament, Chancellor Rishi Sunak said:
“[The scheme] will enable more households to access mortgages on both new build and existing homes, without the need for prohibitively large deposits.”
The Chancellor welcomed lenders’ endorsement of the scheme:
“I’m pleased to say that several of the country’s largest lenders including Lloyds, NatWest, Santander, Barclays and HSBC will be offering these 95% mortgages from next month, and I know more, including Virgin Money will follow shortly after.”
Helping hardworking folks left behind
The pandemic has reduced mortgage options for prospective homebuyers with low deposit.
“This has left many hardworking households unable to get onto the housing ladder,” the government wrote in a Treasury report.
The report further elaborates:
“The mortgage guarantee scheme is designed to increase the appetite of mortgage lenders for high loan-to-value lending to creditworthy customers. It will provide lenders with the option to purchase a government guarantee that compensates them for a portion of their losses in the event of foreclosure. The government will charge a commercial fee for the provision of this guarantee.”
Over 680K guarantees provided since 2010
Since 2010, the government has helped over 681,000 households to purchase a home through various government-backed schemes.
Back in 2013, the government launched the Help to Buy. This was a mortgage guarantee scheme in response to a similar shortage of high LTV products following the 2008 financial crisis.