Potential buyers have been left in the dark since the announcement of the new government-backed 5% mortgage scheme (or MGS – Mortgage Guarantee Scheme), with little detail regarding the ins & outs – Until now.
The trigger was suddenly pulled on the scheme like a nervous outlaw at their first shoot-out, simultaneously revealing it’s immediate start on April 19th along with all the surrounding information. So let’s get right into it!
As already mentioned these mortgages are available from April 19th until December 2022, meaning there’s plenty of time to keep saving for your deposit. Even better still, it’s not just first-time buyers than can access the scheme as it’s available for current or previous homeowners too!
There is however a swathe of conditions that need to be followed to be eligible for the scheme – No surprise there!
· Firstly, you can only use this scheme to purchase a main residential home within the UK. Meaning that you can’t buy a second home or a property you intend to rent out in any way.
· The property price cannot exceed £600,000, so no mansions allowed!
· New-builds aren’t eligible – Due to fears that new-builds simply don’t retain their value.
· Your deposit must be between 5-9% of the price of the property – The more you can put into the deposit the better!
· You must apply for a repayment mortgage – No interest-only options are available through the scheme.
· Finally, you’ll need to pass the standard mortgage affordability check with whichever lender you choose.
On the subject of lenders, the first 7 who are in the scheme have been revealed, they are:
· Bank of Scotland
There are more lenders rumoured to join, but these are the companies that are actively offering mortgages in the scheme as of right now.
Michelle Andrews, Head of Buying A Home at HSBC UK commented on their involvement:
“We have supported home buyers and the wider housing market throughout the pandemic and are excited to support the Mortgage Guarantee Scheme.
After such a turbulent year it is great that this scheme will make a real difference in enabling first time buyers who didn’t think they would have a chance of getting a mortgage and home movers to get the keys to their new home.”
There’s mixed feelings about whether this will truly help out buyers in the long run, as with a lower deposit comes both greater repayments & a higher interest rate. But a 5% deposit is a matter of necessity for many buyers. The question to be asked is: Who will this really benefit?