Brokers say lenders have confirmed products will be available through intermediaries, however questions remain over rates and fees.
“The mortgage guarantee scheme is very welcome. Saving up a deposit is often one of the most challenging parts of getting onto the property ladder,” said Greg Cunnington, director of lender relationships and new homes at Alexander Hall.
“It’s also great to see so many lenders confirm their support for the scheme when it launches in April. We’ve already seen lenders move quickly back into the 90 per cent loan to value (LTV) space in recent months, so the news announced today supports an already established trend to operate at the higher LTVs,” Hall said.
Other brokers welcoming the scheme characterised the market as continuing to shy away from high LTV residential mortgages.
“This initiative is very welcome at a time when the availability of high LTV mortgage products is at an all-time low, and it should hopefully assist more buyers onto the ladder,” said Sharon Duckworth, director at Key Mortgage Advice.
“We expect the vast majority of high street lenders to introduce these mortgages in April and, all in all, another surge in the property market. We are anticipating a great deal of interest in the 95 per cent mortgage option,” she said.
Aaron Strutt, product and communications director at Trinity Financial, said: “There have been rumours of some lenders reintroducing 5 per cent deposit mortgages — but nothing has come to the market. The government needed to do something to tempt the lenders to start offering low deposit deals again, and help borrowers onto the property ladder,” he said.
Questions on rates and fees
Still question marks hang in the air about rates and fees, as well as availability for non-conventional cases.
Cunnington said: “It’s reassuring to see several of these lenders confirm that these products will be available via intermediaries. The rates will likely be higher than at 90 per cent LTV, and criteria is likely to be a little more restrictive in terms of maximum borrowing and credit score requirements. As such, it will be crucial for applicants to take advice from an intermediary on the options available to them.”
The cost issue was raised also by Liz Syms, chief executive at Connect Mortgages.
She said: “The government plans to charge a commercial fee to the lender in return for guaranteeing 95 per cent of the actual debt, between 80 and 95 per cent of the property’s value. We do not know at this stage the impact this additional cost will have on the products on offer from the lenders.
“It’s good to see that a number have lenders have already committed to offering the product, including Lloyds, Natwest, Santander, Barclays, HSBC and Virgin Money. These, however, are mainstream lenders so there may still be a bit of a gap for applicants with more specialist requirements,” she said.
“Hopefully, lenders will have the time to launch their products by the start of the scheme in April. That coupled with the extension to the stamp duty incentive should ensure continued buoyancy of the mortgage market into the autumn,” Syms added.
The scheme announced in the Budget today pledges government guarantees for 80 per cent of the purchase value on a residential mortgage up to £600,000, and with loan-to-values (LTVs) of 91 to 95 per cent.