More Affordable First-Time Buyer Mortgages Could Be On The Way
First-time buyers could soon have access to more affordable mortgages, if new plans the UK Government is mulling over come to fruition.
Housing Secretary Michael Gove is considering measures to make low deposit mortgages available to borrowers who take out an insurance policy when buying their home.
These agreements would involve the homebuyer taking out a form of ‘mortgage guarantee insurance’ that would protect the lender in the event of a default. With this safety net in place, mortgage providers could potentially take more risks with their lending decisions.
“Getting more young people on the housing ladder depends, firstly, on improving their ability to get mortgages. Many people currently renting pay more to their landlord each month than they would need to pay to service a mortgage on the same property,” Gove wrote in the Mail on Sunday.
The plans, which are yet to be finalised, were inspired by a scheme used in the Canadian market. Homebuyers over there are required to take out mortgage guarantee insurance if they are borrowing more than 80% of the property’s value. These policies are offered by the state-run Canada Mortgage Housing Corporation as well as two private insurance providers.
Pete Mugleston, Online Mortgage Advisor’s managing director, has welcomed the proposals and is hoping that they will complement the existing support for first-time buyers.
“Any measures that will help more people get onto the property ladder are very welcome from our perspective, and it’s good to see the government looking closely at what’s working in other countries and asking whether it could be a solution on these shores too,” he said.
“One thing I’d like to stress, though, is that first-time buyers who are struggling to save a deposit shouldn’t delay their plans waiting for these proposals to bear fruit. There is already support for those with low deposits, from the Help to Buy scheme to flexible mortgage lenders, so I’d urge anyone in this boat to speak to a broker immediately to find out what their options are.”
You can find out what support is currently available for people buying their first property in our complete guide to first-time buyer mortgages.