Mortgage rates: When will 5% deposit and 95% mortgages be back? Rishi Sunak's major update

Ultra-low deposit mortgages are set to make a comeback with a new 5% deposit home loan guarantee scheme. The Chancellor Rishi Sunak today announced the scheme will come into force imminently, with dozens of firms signed up.

Rishi Sunak announced a “mortgage guarantee”, telling MPs: “Lenders who provide mortgages to homebuyers who can only afford a 5% deposit will benefit from a Government guarantee on those mortgages.”

He added: “A policy that gives people who can’t afford a big deposit the chance to buy their own home.

“As the Prime Minister has said, we want to turn generation rent into generation buy.”

READ MORE: Budget 2021 LIVE: Rishi Sunak to unveil plan TODAY

What else did the Chancellor announce for the housing market?

Mr Sunak also said the Stamp Duty cut will continue until the end of June.

He added the nil rate band will be set at £250,000 – double its standard level – until the end of September.

He said: “I can announce today the £500,000 nil rate band will not end on March 31, it will end on June 30.

“Then, to smooth the transition back to normal, the nil rate band will be £250,000, double its standard level, until the end of September – and we will only return to the usual level of £125,000 from October 1.”

Neil Weston, Principal of Scout Financial Services welcomed the announcement: “We are thrilled to see Government support for first time buyers included in the Chancellor’s Budget today.

“We have been calling for greater support for mortgage lenders in this space for a while now and action on this was promised by the PM back in October, so it’s great to finally see a plan in place.

“Whilst the availability of mortgages for 90% of the purchase price has improved recently, the market has remained restricted by tight lending criteria and the lack of high loan-to-value mortgages.

“More support for lenders to lend a higher percentage of the purchase price will no doubt be welcomed across the industry and by first time buyers. However, many first time buyers may find themselves in a tricky position where they will now have enough money saved for a deposit, but they are unable to secure a mortgage as a result of being furloughed.”

Marc von Grundherr, director of lettings and estate agent Benham and Reeves, commented’: “While Help to Buy in its various forms has helped homebuyers to an extent, it’s also done a good job of pushing house prices higher and homeownership even further out of reach for many. 

“To roll this sort of counterproductive initiative out to the whole of the market wouldn’t be so bad if the government also addressed the issue of supply.

“If you have trouble climbing the stairs you need to add a handrail, not increase the size of the staircase. However, the Government has, yet again, chosen to do just this.”

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