Why You Should Take Advantage of the UK 5% Deposit Scheme Before It Runs Out
The dream of homeownership has long been a key goal for many in the UK, but in recent years, rising house prices have made that dream more elusive, especially for first-time buyers. Enter the 5% deposit scheme, a government-backed initiative aimed at making it easier for people to buy a home with just a 5% deposit, but act soon before it ends!
What is the 5% Deposit Scheme?
The 5% deposit scheme, formally known as the Mortgage Guarantee Scheme, was introduced by the UK government in April 2021. The aim was to support buyers who could only afford a small deposit by encouraging lenders to offer 95% loan-to-value (LTV) mortgages. In simpler terms, instead of needing to save up for a 10% or 20% deposit, buyers only need to put down 5% of the property’s price, with the rest being covered by the mortgage.
Why Does This Matter?
For many people, the biggest barrier to homeownership is saving for a deposit. House prices have continued to rise, and with them, the size of the deposit required. A 10% deposit on a £300,000 home is £30,000, while a 5% deposit is just £15,000—a significant difference for first-time buyers or those with limited savings. The scheme enables people to get onto the property ladder faster without having to wait years to build a larger deposit.
Key Reasons to Act Now
It Makes Homeownership More Accessible
With house prices high, saving for a traditional deposit can feel like an impossible task, especially for those in high-rent areas where saving is already difficult. The 5% deposit scheme removes that barrier by lowering the deposit requirement, helping people secure a mortgage sooner rather than later.
Interest Rates Are Still Relatively Competitive
Mortgage rates have risen in 2023 compared to the previous few years, but they are still relatively manageable. However, waiting too long could lead to further increases in rates. Locking in a mortgage while the 5% deposit scheme is still available could save buyers from higher rates in the future and make monthly payments more affordable.
House Prices Are Still Rising
House prices in the UK have steadily increased over the last decade. While there may be occasional dips, the overall trend has been upward. This means that the longer you wait, the more you’ll likely need to save for a deposit and the larger your mortgage will need to be. By taking advantage of the 5% deposit scheme now, you can enter the market before prices rise even further.
The Scheme is Set to Expire
The government’s 5% deposit scheme is currently set to end in 30th June 2025. Once it ends, buyers will need to revert to saving for larger deposits, which will make it harder to buy a home. Acting before the deadline allows you to secure a 95% LTV mortgage while it’s still available.
Government Support Adds Security
The government-backed nature of the scheme encourages lenders to offer more 95% mortgages, providing more options for buyers. Without this guarantee, many lenders would not offer such high LTV mortgages, making it harder to find suitable deals. This is a unique moment where government intervention is actively making homeownership easier, so it’s wise to take advantage before it’s too late.
Conclusion
The 5% deposit scheme has provided a lifeline for many people struggling to save for a home in the UK’s competitive housing market. With the scheme set to expire soon, now is the best time to take advantage of the opportunity. By acting before it runs out, you can secure a lower deposit, benefit from competitive interest rates, and get onto the property ladder before house prices rise further. If homeownership is on your horizon, don’t let this opportunity pass you by, get in contact with us so we can help find you the perfect property!
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