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Mortgage rates: Where can you get a 5% deposit mortgage? What does it mean for you? Expert

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Chancellor Rishi Sunak announced a new “mortgage guarantee” scheme for buyers with a five percent deposit as part of his plan for healing the economy. Addressing the House of Commons, Mr Sunak said he wanted to turn “generation rent into generation buy”. The new scheme will see lenders benefiting from a Government guarantee on lending to people who can only afford five percent of their mortgage. As it’s understood, the programme will be available to current homeowners as well as first-time-buyers looking to buy a house up to the value of £600,000.

Where can you get a five percent deposit mortgage?

Yorkshire Building Society will become the first lender to offer five percent loan-to-value (LTV) mortgage rates for clients.

However, with this company, the deal only stands for first-time buyers and the society will apply strict conditions on lending, including ruling out flats and new-build hones.

Yorkshire’s 95 percent LTV deal, which will be offered through mortgage brokers, will have an interest rate of 3.99 percent fixed for five years and will cost £995 to sign up.

The mortgage firm isn’t taking advantage of the Government’s guarantee scheme however, and said it was always planning a transition back towards low deposits due to high demand within the market.

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Other firms are expected to kickstart their own lower mortgage rates next month, and although the Chancellor has announced a number of names who are taking part, some other big banks are yet to decide.

Mr Sunak said Lloyds; Natwest; Santander; Barclays and HSBC would offer the lower rates “from next month” while other lenders like Virgin Money would “follow shortly after”.

A spokesperson from Nationwide said “no decision has been made” while Metro Bank said it would “digest the full details of the Government’s guarantee on 95 percent loan-to-value mortgages before providing an update in due course”.

Nationwide pointed out the building society already offers five percent mortgages to existing members moving house and via the Help to Buy scheme.

When asked about how the new guarantee scheme will impact the property market in general, Mr Hemming said it’s good news there too – for homeowners, anyway.

He explained: “The fact this scheme has proven so popular just goes to show the demand that it’s going to create.

“This is likely to increase competition for eligible properties and could drive prices up, which is great news for homeowners, but less so for those hoping to buy.

“We’ve seen the market buoyed by demand of the stamp duty holiday and based on the initial reaction, this scheme seems set to be even more popular.”

This all sounds good in theory, but a number of people will likely be concerned about whether this really means they can buy, as a number of Government schemes don’t often translate well to the average person.

Mr Hemming was asked if the new five percent mortgage guarantee actually means more people will be able to afford a house, to which he replied: “The term ‘generation rent’ has been coined on the back of would-be first-time buyers being stuck in a cycle of paying high rental payments which prevent them from saving for a deposit.

“This scheme halves that deposit and will make the prospect of buying far, far more realistic for a lot of borrowers.

“Of course, high property prices will still be a barrier for many, but this is a real step in the right direction.”



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