British Chancellor Rishi Sunak is set to unveil a new mortgage program in his March 3 budget that will help first-time buyers with small deposits access the real estate ladder.
The Treasury said the government will offer incentives to lenders, cutting back 95% of mortgages that “virtually disappeared” during the COVID-19 pandemic.
There were only 8 low deposit products available nationwide as of January 2021, the Treasury said.
According to the plans, buyers will only pay 5% down payments to purchase homes worth up to £ 600,000 ($ 836,000) and offer lenders a guarantee to provide mortgages covering the remaining 95%.
Sunak, who has said he will use the budget to talk to people about the impact of the crisis on the UK economy, is expected to announce the program on Wednesday.
It will be available to lenders from April this year and will be subject to the usual accessibility checks.
According to the Treasury, the program will support the real estate market, protect jobs and “double the Prime Minister’s promise to turn generation rent into generation purchase.”
Prime Minister Boris Johnson said: “I want Generation Rent to become a Generation Buy and these 95% mortgage guarantees help keep that promise.
“Young people shouldn’t feel left out of the possibility of owning their own home and it will now be easier than ever to access the homeownership ladder. “
The program, which is part of the Chancellor’s Jobs Plan, aims to stimulate the real estate market and increase the appetite of lenders by supporting the industry “to deliver high-value loans to creditworthy clients across the Kingdom. -United”.
“Owning a home is a dream for millions of people across the UK and we want to help as many people as possible. Saving for a big deposit can often be difficult, and the pandemic has meant that there are fewer low-deposit mortgages available, ”Sunak said.
Lenders will have the option of purchasing a government guarantee that compensates them for a portion of their losses in the event of foreclosure, as part of the program.
The Chancellor added: “So by offering lenders the option of a government guarantee on 95% mortgages, many other products will become available, helping people to realize their dreams and move up the housing ladder. “
“All lenders under the program will also offer fixed mortgages for at least five years as part of their product line, providing options for consumers with smaller deposits who want the security and predictability of a loan. longer term fixed rate mortgage, ”says Treasury.
Sunak also warned of the extent of the damage caused by the coronavirus crisis. He suggested he could use the budget to fix public finances.
He told the Financial Time that there are “huge tensions” and that the UK is “exposed” to changes in currently low interest rates, with a 1% increase worth £ 25bn per year for the service in debt as a result of vast spending to support the UK economy.
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