Deposit unlock scheme gives new hope for home buyers

by | Monday 7th Feb 2022 | Mortgage News

New build for sale

Over the last few years there has been a lot of talk around deposits or, more specifically, the struggles that new buyers go through to save a deposit. With banks and building societies restricting lending and becoming seemingly more demanding when it comes to customer cash contributions, new buyers have become disillusioned with the whole idea and feel penalised by banks, building societies and home sellers in favour of older, more experienced purchasers. 95% mortgages are not as common as they once were and increasingly more lenders are wanting larger deposits meaning it is harder for cash strapped 20 something year olds to buy.

What is already available?

In 2013, the government released a scheme called the help to buy mortgage guarantee scheme which allowed people to buy a new build property at 95% loan to value or with only a 5% deposit. Unlike the help to buy equity loan scheme, the mortgage guarantee scheme did not give people a separate loan towards a property purchase but instead allowed people to buy a home but with much less cash contribution than they would normally need. Through the scheme the government gave the lender a guarantee on the loan however this did not protect the buyer and they were still liable, much like a standard mortgage. This version of the scheme was discontinued in 2016 with the help to buy equity loan being extended until 2023 however a few lenders have offered their own ‘Mortgage Guarantee’ products.

What has changed over the last couple of years?

With the effects of the pandemic taking hold in 2020 and 2021, many mortgage lenders became even more strict with their lending with some increasing their minimum deposit to above 15% and some even withdrawing from the market completely for a period. However, now that the uncertainty of the pandemic has begun to clear, a new scheme has become available and mortgage lenders are all beginning to jump on the band wagon to kickstart the stagnating first time buyer market. The deposit unlock initiative is not a government introduced scheme but more of a joint venture developed in collaboration with mortgage lenders and the housebuilding industry.

Exclusive only to new build properties, the deposit unlock scheme works in a very similar way to help to buy mortgage guarantee in that it allows a buyer to secure a 95% mortgage on a new home subject to being able to afford the mortgage in the standard sense. The scheme is only available with builders who are partaking in the scheme (not all are), properties that have been specifically designated as part of the scheme (not all homes on a development will be available under the deposit unlock so make sure you confirm with the sales representative first) and the maximum mortgage you can get is £750,000.

Who is offering the deposit unlock scheme?

Currently the builders partaking in the scheme are:

  • Barratt
  • Bellway
  • Bewley
  • Bloor Homes
  • Countryside Properties
  • Crest Nicholson
  • Croudace
  • Davidson Group
  • Fairview
  • Hill
  • Persimmon
  • Redrow
  • Taylor Wimpey
  • Vistry

What do the advisors say about deposit unlock?

Content manager at Oportfolio mortgages Louis Mason is excited by the emergence of the new scheme: “I think I speak for everyone at Oportfolio when I say that this is big news for the property market, especially people who just need that lifeline to get on to the property ladder. Most of us have either experienced or know someone who has experienced the struggle of trying to save a 10, 15, 20% deposit while also paying out for rent and other daily expenses.

It can be quite depressing seeing older more experienced buyers with an already well-established property portfolio and it really can feel like you are being marginalised for not being able to save enough money. Now that the mortgage unlock scheme is hitting the market, a lot more hard-working buyers will be able to buy the home they deserve. As this is quite a new scheme and as it is only available on new build properties, it is extremely important that you talk to a mortgage advisor if you want to go down this route so that they can help and guide you through the process and make sure everything goes smoothly for you.”

What do the builders say about deposit unlock?

Karly Williams, Sales and Marketing Director at Barratt David Wilson said: “We are always looking at ways we can help even more people either onto or up the property ladder and Deposit Unlock is the latest way for those in need to do just that. By significantly reducing the size of deposit needed to secure a new home, we’re hoping we can make it much more accessible and affordable for buyers to move into their dream home.”

If you or someone you know is thinking of buying a new build property and are wanting to know more about the mortgage unlock 5% deposit scheme, then please give our friendly and knowledgeable advisors a call to see how we can help.

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