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  • Tom Williams - Metro

New 5% deposit scheme to be introduced, to help people buy.

People will be able to buy homes with a deposit of 5% under a new scheme announced by the chancellor. It’s hoped the ‘mortgage guarantees’ will help current homeowners as well as first-time buyers looking to buy a house worth up to £600,000.

The policy had been widely trailed in advance of the Budget but Rishi Sunak has announced more details in the Commons, telling MPs: ‘Lenders who provide mortgages to homebuyers who can only afford a 5% deposit will benefit from a Government guarantee on those mortgages. ‘I’m pleased to say that several of the country’s largest lenders including Lloyds, NatWest, Santander, Barclays and HSBC will be offering these 95% mortgages from next month, and I know more, including Virgin Money will follow shortly after.

‘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.’ Under the scheme the Government will offer to take on some of the risk of low deposit loans, meaning lenders would have some protection from potential losses. These types of loans are often seen as more of a risk because borrowers could end up in negative equity if house prices fall – meaning they owe more than their property is worth.

Lenders will be able to purchase a Government guarantee that compensates them for a portion of their losses in the event of foreclosure. Budget: Rishi Sunak extends stamp duty holiday until June 30 Play Video Loaded: 0% 0:00Progress: 0% PlayMute Current Time0:00 / Duration Time1:54 Fullscreen The new initiative follows in the footsteps of the UK-wide Help to Buy mortgage guarantee scheme, which was launched in 2013 and helped to reinvigorate the market after the 2008 financial crisis. That scheme, which also offered 5% deposit mortgages, is no longer running. It helped more than 100,000 households across the UK to buy a home, but it also drew accusations of pumping up property prices. Many low deposit mortgages vanished from the market last year amid concerns about the wider economy.

RISHI SUNAK - Pensions lifetime allowance frozen for next five years What is the restart grant for small business owners and how can you apply for it? UK borrowing hits record levels unseen since WWII However, more recently, lenders have been bringing back low deposit deals, clustered around the 10% deposit level.

For example, Yorkshire Building Society launched two new 10% mortgages on Wednesday exclusively for first-time buyers. It comes as Mr Sunak announced further support for potential homebuyers as he extended the stamp duty holiday by three months.

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