Category: First Time Buyers
Sep 07, 2021
The return of 95% mortgages for first time buyers creates an opportunity for many to become home owners.
In recent times many under 40s felt stumping up a 15% deposit is just out of reach and with lending criteria from UK banks and building societies tightening lending criteria at the start of the pandemic (covid -19) causing many of would be buyers now not meeting the new eligibility criteria on the basis of poor credit or poor affordability.
The announcements that the government will back mortgages and accept some of the risk associated with the higher loan to value mortgages and smaller deposit, providing reassurance to lenders is very welcoming to hopeful property buyers.
How Will 5% Deposit Mortgages Work?
The government will offer guarantees to lenders bringing back 95% mortgages to first time buyers and also home movers purchasing a property up to the value of £600,000.
How Much Would a 5% Deposit Be for a House In The UK?
Government data published in March 2021 shows that house prices have risen by 1.7% since February 2021. This takes the average property value to £274,615.
Here is how a 5% deposit will vary in the UK regions based on the average property prices in the UK in March 2021;
| Region | Average Price | 5% Deposit |
| East Midlands | £219,950 | £10,997.5 |
| East of England | £315,059 | £15,752.95 |
| London | £500,310 | £25,015.5 |
| North East | £145,893 | £7,294.65 |
| North West | £187,924 | £9,364.70 |
| South East | £348,615 | £17,430.75 |
| South West | £287,650 | £14,283.5 |
| West Midlands | £220,982 | £11,049.10 |
| Yorkshire and The Humber | £188,575 | £9,428.75 |
Who Will Be Eligible?
Lending criteria will still play its role and lenders have their own lending criteria which will need to be met. A persons eligibility for a mortgage will be heavily dependant on their affordability which is why lenders look at the following when assessing a mortgage application.- Annual Gross Income
- Expenditure
- Debt to Income Ratio
- Deposit Size
- Job Type (Employed/ Self Employed)
- Credit History
- The Type of Property You Want To Buy
Can Self Employed Workers get a 95% Mortgage?
Being Self Employed can reduce the choice of lenders, depending on your individual circumstances. Lenders will usually look at your net profit of your last 2 years worth of tax returns if you’re a sole trader and your salary and dividends taken if you’re the owner/ part owner of your own limited company. Lenders will also want to see business bank statements to money coming in is at a sustainable level.The Mortgage Bubble has access to a network of lenders which opens up opportunity to self employed workers obtaining a mortgage in 2021.
Can I Get a 95% Mortgage If I Have Been Furloughed?
The furlough scheme has been extended until the end of September 2021. With this date looming a lot of lenders and UK building Societies are requiring to see income via a pay slip without furlough payments and income back to pre-covid levels.The Mortgage Bubble does have access to a limited number of lenders who can offer lending while still on the furlough scheme, so contact us to find out more about the 95% mortgage scheme and we can provide you a personalised illustration.
