Martin Lewis: Money Saving Expert issues warning on deposits for new 5% mortgage scheme | Personal Finance | Finance
Martin Lewis appeared on ITV’s This Morning earlier today, providing important updates to Britons when it comes to the Budget. While the Money Saving Expert is set to interview the Chancellor later on this evening, he was on hand to break down some of the news from yesterday’s economic event. One particularly important point which piqued the interest of many people was the new mortgage scheme being developed by the Government.
The scheme has been developed to help people on the property ladder and will involve ultra-low deposits.
Under the scheme, Britons with only a five percent deposit will be able to secure a home, if they are a current homeowner or a first time buyer wishing to secure property up to £600,000.
Usually, lenders can be hesitant to accept low deposits as if house prices fall, borrowers can end up in negative equity.
The Government, however, will be taking on some of this risk through offering lenders a guarantee to compensate them for a proportion of losses if foreclosure were to occur.
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“Now, if you’re asking me, I would always push to a 10 percent deposit mortgage where mortgage rates get much cheaper.
“As a result, you will spend less over the years.
“Ultimately for me, saving in a Lifetime ISA to get the 25 percent boon, waiting until later and having a lower mortgage rate is a better financial decision.
“But of course, choosing the house you live in is not just a financial decision, but a lifestyle one, too.
“You will have to make that balance yourself, but if you go for the five percent now, you’ll probably end up paying proportionally more for it because it’s going to be a costlier mortgage than you would if you had a 10 percent deposit.”
Mr Sunak confirmed the new mortgage scheme would be going ahead as he spoke to members of Parliament in the Commons yesterday.
He said: “Even with the stamp duty cut, there is still a significant barrier to people getting on the housing ladder: the cost of the deposit.
“A mortgage guarantee will stand behind homebuyers. This policy gives people who can’t afford a big deposit the chance to buy their own home.
“We want to turn generation rent into generation buy.”
The Chancellor went on to confirm a number of major lenders would be participants in the upcoming scheme.
NatWest, HSBC, Barclays, Lloyds and Santander have all confirmed they will be offering the new five percent mortgage deal.
Britons will be able to access the deal as soon as next month, allowing the home buying process to begin.
And with a stamp duty extension also confirmed, homebuyers could stand to significantly benefit.
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