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News April 9, 2021

Could you benefit from a 95% mortgage?

Residential property sales throughout Mid Wales and Shropshire have rocketed over recent months and demand continue to rise.


And with even more potential homebuyers entering the market with low deposit mortgages (as little as 5%) from this month, homeowners still wondering if to sell or not are being encouraged to enter the market.


Morris, Marshall and Poole with Norman Lloyd, estate agents covering Powys, Ceredigion, Shropshire and Gwynedd, said demand was outweighing supply and now is the time to sell.


Talk to our mortgage adviser

And anyone looking for a mortgage can talk to the Mortgage Advice Bureau’s Stuart Potts. He’s based with MMP/NL and available by appointment, phone or email at our offices throughout Mid Wales and Shropshire. You can also call our Newtown office on 01686 626160 to reach him.


Since March 2020, low deposit deals have virtually disappeared from the mortgage market, hitting first-time buyers hard, as well as those with low levels of equity in their property. During the COVID-19 pandemic, lenders saw these deals as high-risk and withdrew most of their offerings.


In March this year, the Government announced it will be backing a new mortgage guarantee scheme to combat this.

During the 2021 Budget, Chancellor Rishi Sunak announced that new 95% mortgages will be introduced in order to allow first-time buyers to get on the property ladder with as little as a 5% deposit.


“[It is] a policy that gives people who can’t afford a big deposit the chance to buy their own home,” he said.


This new Government scheme will enable mortgage lenders to offer loans of up to 95% of the value of the property.


This scheme will solely be available to buyers of properties costing up to £600,000. The mortgages will be available until 31 December 2022.


So what are 95% mortgages?

A 95% mortgage covers 95% of a property’s value, leaving the buyer to cover the remaining 5% in the form of a deposit. This can also be referred to as a 95% LTV (loan-to-value) mortgage. Until now, most mortgage lenders were offering up to 85% mortgages, which means buyers can now save up to a third of what they would have had to pay prior to this announcement.


Buyers will also be able to fix their initial rate for up to five years. While it's similar to the Help to Buy scheme, it's not restricted to first-time buyers or new build properties.

Is a 95% mortgage right for you?

If you are able to afford a larger deposit on your new home, you may find you have more choice when it comes to finding a mortgage with lower interest rates. However, if you are a first-time buyer or struggling to fund a larger deposit, then this is a great solution for you.


Are buyers with a small deposit guaranteed to get one of these deals?

Buyers will still be subject to affordability checks, so it's not a guarantee that they'll be offered one even if they have the 5% deposit. Lenders could be concerned about the potential for buyers to fall into negative equity due to the small deposit amount and uncertain financial outlook.


Why will lenders offer these mortgage deals if they had previously removed them?

They are backed by the Government, so this means the risk is reduced for the lenders.

If you’re a first-time buyer with a small deposit, or have limited equity in your home but are looking to move, these new deals could offer the helping hand you need with your property purchase.


If you’d like to know more about buying or selling a house, or speak to Stuart Potts our Mortgage Adviser from the Mortgage Advice Bureau, then contact one of our offices.

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