5% mortgages - a promise not a guarantee

Boris’ plans for ‘generation buy’

It’s been a month since Boris announced talk of 5% mortgage deals. Excitement was built for first-time buyers who’d finally thought they could get on the property ladder soon. But the truth is, they might be able to save a 15% deposit by the time mortgages requiring only a 5% deposit return back to the market!

The concept of ‘generation buy’ sounds fantastic and we would love to help more people become a property owner. But unfortunately, with our experience to date submitting mortgage applications during the pandemic, it’s not been an easy ride even for those with 15% deposits and a clean credit score. 10% mortgage deals have vanished because lenders are playing it safe which makes us question if and when 5% mortgage deals will return.

What do lenders think?

Banks and housing charities have expressed their concerns about the recent news stating that it represents a return to dangerous lending practices. Though Boris has claimed the government would help to cover a portion of the lender’s losses if the borrower defaulted, lenders have a duty of care to consider the affordability of the mortgage in the long term. Of course, a 5% mortgage sounds great, but with a lower deposit, the risk associated with negative equity is increased.

Perhaps Boris does want to ‘fix our broken housing market’, however without lenders backing, it feels a bit like an empty promise at the moment. For now, if you’re looking to buy your first home we would encourage you to seek professional mortgage advice to find out how much you can borrow and what mortgage deals are available to you, and also KEEP SAVING!