2 March 2021

95% mortgages make a comeback

The Chancellor is set to announce the return of the 95 per cent loan-to-value (LTV) mortgage in tomorrow’s Budget. The Government is set to guarantee the loans, enabling lenders to offer high LTV deals on properties worth up to £600,000, to first-time buyers and homeowners.

Turning ‘generation rent’ into ‘generation buy’ has been a focus for Boris Johnson for a while so the return of 95 per cent loan-to-value mortgages for first-time buyers doesn’t come as a complete surprise. This, coupled with the likely extension of the stamp duty holiday which had been due to end next month, will result in a Budget which should be a real boost for buyers.

The mortgage guarantee is positive news for first-time buyers, particularly as it is not restricted to new homes as is the case with Help to Buy, although critics may argue that it will only aid house price inflation. But without such a scheme would developers be so keen to put spades in the ground? The supply of new housing is nowhere near where it needs to be to satisfy demand.

For those with little in the way of deposit, finding a 95 per cent LTV mortgage has been pretty much impossible in recent months. Now and again a building society has offered them, with Saffron building society launching at 95 per cent in June, but demand was such that it only lasted a matter of days. Furness BS also has a selection of 95 per cent products although these are restricted to certain postcodes.

The only other option currently to obtain a mortgage at this level is to call upon a third party, typically a parent, to provide extra security in the way of a deposit or equity within the ‘guarantor’ property. Not everyone is in the fortunate position to be able to do this.

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