Will you ever be able to get on the property ladder?

If you dream of buying your own home, the year ahead is a really good time to do it.


In his March Budget, Chancellor Rishi Sunak announced measures that would help to “turn generation rent into generation buy”. One of these was the return of the 95% mortgage. 

The impact of this is that up till the end of December 2022, home buyers will only need to pay 5% of the cost of their home as a deposit, and can use a mortgage to make up the remaining 95% of the cost.

This is a massive incentive for would-be home owners. After the financial crash of 2008, mortgage deposits gradually increased. By 2020, a first-time buyer could expect to pay at least 10% deposit, with many lenders demanding up to 15%. 


What difference does the 95% mortgage make?

The 95% mortgage enables you to purchase a property and pay only 5% deposit. 

According to Gov UK, the average property price in the UK is now £265,668. The table below shows the amount of deposit that would be needed to purchase a property of this value depending whether the lender requires 5%, 10% or 15%. 


Deposit needed for a home costing £265,668
5% deposit £13,283
10% deposit £26,567
15% deposit £39,849


As you can see there is a significant difference between the amount of money you would need for a deposit in each case. A difference of over £26,000 depending whether you have to pay 5% or 15% deposit.


Why are 95% mortgages possible now when they weren’t before?

Rishi Sunak announced in his Budget that the government will underwrite the new 95% mortgages by guaranteeing the amount of money between 80-95% of the value of the mortgage. This means that if for any reason the borrower could not make their mortgage repayments, and the home was repossessed, the government would repay the lender that amount of the mortgage that would otherwise be lost. So it is now less risky for lenders to offer 95% mortgages.

However, the 95% mortgage scheme is currently due to finish at the end of 2022. So if you dream of your own home and have been saving for a deposit, you need to do everything you can to make this happen within the next year in case the 95% mortgages do come to an end as currently planned.


Who is eligible for the 95% mortgages?

There are three main conditions to be eligible for a 95% mortgage.

  • The property you are buying needs to be your main residence. The 95% mortgages do not apply if you want to buy either a second property or a buy-to-let property.
  • The value of the property must be no more than £600,000.
  • The mortgage must be a repayment mortgage, not interest-only. 

As well as the above specific 95% mortgage criteria, you will also need to fulfil the standard mortgage credit and affordability checks. As part of this, a mortgage lender will need to look at:

  • Your employment status and income;
  • Your monthly outgoings and current debts;
  • Your credit history and current credit score;
  • The amount of money you want to borrow.

So as well as saving for your deposit, you need to start addressing any potential issues with the above to improve your chances of getting a 95% mortgage. You may want to do some or all of the following:

  • Check your credit report for errors or problems. You can do this through one of the main three Credit Reference Agencies (CRAs) in the UK – Experian, Equifax and Transunion. Let the CRA know if there are errors that need to be fixed. 
  • If your credit score is lower than you would like, one potential way to fix it is to take out a small short term personal loan and ensure that you manage your repayments well. This provides good evidence to other lenders that you are a responsible borrower.
  • Increase your income if possible, either by considering a job change or taking on extra work.
  • Ensure that you have a monthly budget and have a clear idea of your living expenses and other outgoings. You need to be able to show evidence to a potential lender that you will be able to afford mortgage repayments.
  • Do your best to pay off as much existing debt as possible. Many lenders are uneasy if you are already using more than 25-30% of your available credit.


We hope that the above information helps to explain more about 95% mortgages and gives you some practical advice about how to ensure that you are eligible.

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