Is Boris’ 95% mortgage announcement a good move?
Getting on the first step of the property ladder can seem like a giant leap these days, can’t it? If you’re young and haven’t been able to save up a deposit, it might seem that your dream of home ownership coming true is something that might only happen in the distant future.
Well, we at Cherry Lets have some good news for you. The Prime Minister, Boris Johnson, looks like he is trying to give you a leg up. We were catching up with the digital Conservative Party conference and Boris has declared that he wants to relax stringent rules on deposits and mortgages for first-time buyers.
From “generation rent” to “generation buy”
In the current COVID-19 climate, typically, you’ll need to find a deposit that is between 15 and 20 per cent of the price of the property.
It’s become more difficult just recently, with lenders becoming much more risk-averse, particularly in the first-time buyer market and moving away from low-deposit mortgages.
It’s a shame because many people who can actually manage a monthly mortgage repayment can’t afford a deposit for a property in the first place. So, you may have found your perfect home in North Oxfordshire & South Northants but until you can find thousands of pounds for the deposit, that move is out of the question.
The Prime Minister’s speech seems like a welcome move, and if it works, could turn many people from renters into home-owners – from “generation rent” to “generation buy”.
A solution with a problem?
But, there’s a potential problem. Boris’s words were welcomed by many, although a number of commentators noted that it was short on detail. Yes, it grabs the headlines, but what are the mechanics of it all?
Will you, wanting to buy a house in North Oxfordshire & South Northants be eligible for a 95 per cent mortgage, or will there be some criteria that will still prevent you getting on the property ladder?
Will the banks be expected to take all the risks, or will the Government step in and be a guarantor?
And will banks, who are still smarting from losses incurred years ago, be willing to offer the mortgages in the first place, particularly if they are now lending in a more responsible manner?
Whatever happens, it looks like the Government is trying to do something, but we await the full details.
Help is out there, and it’s been extended
As a first-time buyer, there is still help out there for you.
Help to Buy is a scheme that started with the government lending “first-time buyers and existing homeowners’ money to buy a newly-built home”. It proved very popular when it was first launched, and we saw a few purchases using this initiative, particularly as people only needed a five per cent deposit.
The Government has now confirmed that a new Help to Buy: Equity Loan scheme “open to first-time buyers only will be available for two years from 1 April 2021. The Help to Buy scheme will end on 31 March 2023”.
In effect, you put down a five per cent deposit, the Government provides a 20 per cent loan, and you find a mortgage for the remainder.
There are all sorts of different limits based on UK regions, and there are strict rules that come with it.
It might be that as a first-time buyer, you don’t want to get involved in these schemes, and want to do as much as you can to raise a larger deposit.
It takes hard work and discipline to put aside thousands of pounds, but it can be done, and we have seen a few people do it too even though they are getting into property for the very first time.
From saving a percentage of your monthly wages, to selling items online, to taking extra part-time work or even moving back in with Mum and Dad, it can be a hard slog but you have to think of the end result – a house of your dreams that belongs to you.
If you need more advice on this, our team at Cherry Lets have plenty of experience, so can offer you some tips.