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Government mortgage guarantee scheme launched

The government project to guarantee 95% loan-to-value (LTV) mortgages for homebuyers, which Rishi Sunak announced during last month’s Budget, has now officially been launched.

The project is intended to make it easier for first-time homebuyers to get on the property ladder by enabling them to sign up to mortgages on properties valued at £600,000 or under with a deposit of just 5% of the value. The government will act as guarantors for 95% of the mortgage total and will pay lenders some of any losses they might incur if the borrower defaults on the payments.

This provides lenders with some security, and already five lenders have announced the availability of new products under this government scheme. NatWest, HSBC, Barclays, Santander and Lloyds are the five in question, and Virgin Money has indicated that it will join them in May.

Santander has introduced three products with a LTV of 95% that cover houses valued at £600,000 or less, and flats with prices of £400,000 or less. The rates are 3.99% for a three-year fixed loan or 4.09% for a five-year one, and there will be no fees or valuation charges.

Speaking to FT Adviser, Santander’s Head of Mortgages, Brad Fordham, said:

“We know that buying a home is expensive and finding the money for a deposit and the upfront costs can sometimes prove a barrier to potential homeowners.”

This will bring more potential buyers into the mortgage market, and it could also lead to more people applying to study CeMAP courses so that they can become mortgage advisors.

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