In March’s budget, the Chancellor of the Exchequer announced an exciting new government initiative to facilitate home buying with the return of 95% LTV mortgages.

The scheme, which is available to home movers and First Time Buyers, will allow lenders to offer 95% mortgages for the first time since they were widely used pre-2008 – before the notorious credit crunch put a stop to them!

In essence, the government guarantees the mortgage lender to ensure that the risk to them is similar to offering a mortgage product at 75%. 

This new scheme opens in April 2021 and will run up until December 2022.

Lenders will have to offer a five-year fixed rate as part of their range of mortgages on offer.

There are a few ground rules, such as;

• You must be buying your primary residence
• The maximum purchase price is £600,000
• You must have a 5% deposit (in fact, between 5% and 9% to secure one of the lender government-secured products)
• You can only choose a Capital and Interest mortgage (a repayment mortgage to ensure you reduce the capital outstanding)
• Your financial position MUST fit within the mortgage lenders affordability criteria

So far, five lenders have committed to offering these mortgages, with one more to follow in due course. The best way to see all of the rates is to use an Independent Mortgage Adviser, such as Conran Mortgages.

So what will the rates be?

This is a million-dollar question and something I am highly passionate about. As I see it, as the government is protecting the position of the banks, I feel strongly that the banks need to do the right thing and offer rates based on their risk at 75% LTV!

Presently, at 75% loan-to-value (the same risk as this new government-backed incentive), you can secure a 2-year fixed-rate mortgage at 1.31%* and a 5-year fixed-rate at 1.54%*. If the banks used their normal risk-based approach to lending, then surely rates will be around this mark, but perhaps I am being naïve to think this will be the case… I hope not!

We will find out very soon!

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*Rates are correct at time of going to press.