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Why You Don’t Need To Wait For The Government’s Guarantee Scheme To Get A 5% Deposit Mortgage

By Mark Langshaw

Published: 16th March 2021 Last updated: 24th August 2021

The government’s upcoming mortgage guarantee scheme aims to make 5% deposit mortgages readily available again after these products virtually disappeared from the market during the coronavirus pandemic. The move will make homeownership more accessible to first-time buyers and people who would otherwise struggle to cobble a deposit together, but what many would-be borrowers don’t realise is that it’s possible to get a 95% LTV mortgage without using the scheme.

Granted, it’s very difficult to get onto the property ladder with only 5% deposit these days, but not impossible, and options besides the new government-back initiative seem to be on the rise. For instance, intermediary-only lender Accord Mortgages has just launched a 95% LTV product with a five-year fixed rate (3.99%), £995 fee, free standard valuation and a maximum loan size of £500,000.

The introduction of this new low-deposit product sees Accord become the first lender to re-enter the 95% LTV space, which was left almost barren by the COVID-19 crisis. Rather than commit to the guarantee scheme, Accord has chosen to cautiously dip its toes back into 5% deposit waters, monitor the demand and uptake for them, as well as ensure that they’re viable in the current climate.

The new product is exclusive to first-time buyers, who can potentially borrow up to 4.49 times their income. It is not available for flats, new-build houses and properties in Northern Ireland, though.

Accord’s re-entry into 5% deposit mortgages is good news for first-time buyers, who often struggle to meet lenders’ minimum deposit requirements. Customers who fall into this demographic have a viable option to apply for right away, and even after the mortgage guarantee scheme has launched, more product choice for customers can only be a good thing.

There are other options to consider

Accord’s new product and the guarantee scheme aren’t the only options for low-deposit borrowers.

While 95% LTV lending was scaled back during the pandemic, it didn’t disappear completely. Options including family-assisted mortgages and Shared Ownership never went away, and with the help of mortgage brokers who specialise in low-deposit deals, people have still been able to get a foot on the ladder with just 5% deposit, albeit with more difficulty and underwriter scrutiny than before.

Pete Mugleston, our managing director and a UK mortgage expert, said: “It’s still been possible to get a 5% deposit mortgage during the coronavirus pandemic, but due to the options being so restricted, professional advice from a broker who knows the market is vital if you want a good deal.

“The introduction of Accord Mortgages’ new 95% LTV product is good news for first-time buyers and a big positive for the industry as well. It shows that mortgage lenders are becoming confident enough to re-enter the 5% deposit arena, even without the mortgage guarantee scheme’s safety net behind them. This bodes well for everyone since low-deposit customers will have more product choice and a corner of the market that saw a big decline is gradually returning to life.”

Accord’s new 95% deposit mortgage will be available from 17th March, while the mortgage guarantee scheme gets underway in April. To find out what other 5% deposit mortgage options are available, make an enquiry with us and we’ll match you with a broker for free.

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