The launch of the government’s Mortgage Guarantee Scheme opens the door to a greater number of mortgage products suited to borrowers with smaller deposits, according to Kate Davies, executive director of the Intermediary Mortgage Lenders Association (IMLA).
However, only a few lenders – including with Lloyds, Santander, Barclays, HSBC and NatWest – have said they will offer these mortgages so far, and some of those who have done so have made it clear that their products will not be available for new-build properties or flats, for example.
The scheme also excludes applicants who have any form of credit impairment, and also lenders who securitise loans.
When these factors are added to the additional costs associated with the scheme, many lenders are preferring to offer their own 95% loan-to-value (LTV) products.
Davies said: “To some extent this is not a surprise, the last time government offered support for high LTV mortgages, take-up was low.
“But the fact that the new guarantee scheme is now available has clearly given lenders more confidence to return to this part of the market – and that is a clear benefit.
“We will need to wait to see how borrowers respond this time around.”
The scheme was first announced in Chancellor Rishi Sunak’s Budget speech, and aims to help first-time buyers or current homeowners secure a mortgage with a 5% deposit, in order to buy a house of up to £600,000.
Davies believes that prices will be a factor and many of the non-government-backed 95% products which have recently been launched may well represent better value for borrowers.
She added: “There is a big role here for intermediaries to demonstrate their expert knowledge of the market and steer borrowers towards suitable and affordable products.”