5% deposit mortgage: 'It will give my little girl security'

Before lockdown Andrew Smith was looking to buy a house to live in with his nine-year-old daughter.

However after coronavirus hit he was unable to view homes and his mortgage offer ran out.

The 42-year-old said a new UK government mortgage scheme would help provide some security for him and his little girl.

The Treasury said that lenders are now to offer mortgages to borrowers offering a deposit of just 5%.

However the policy, announced in the UK government's budget, comes as average house prices in the UK continue to rise to record levels.

After years of renting, Andrew, from Caerphilly, wanted to get on the property ladder as soon as possible and was successful in getting a 5% mortgage last January.

He went through a mortgage broker and managed to get everything agreed and had the certificates - all he said he had to do was find somewhere to live.

However, the lockdown last March meant he was not able to go to view properties.

"A month after loan approval we ended up in lockdown and there was very little movement on the property market," he said.

"The loan expired twice during this - after an initial extension but then when the lenders pulled all the 5% deposits I was effectively priced out of it completely."

Andrew said living by himself and having to save for a mortgage on his own meant financially it was not viable for him to buy and after the removal of 5% deposit deals, he decided to continue to rent.

"My daughter was really disappointed last year and I felt really bad - she was really excited about having a forever home so this news is really welcomed," he said.

He said he had stayed in touch with his mortgage broker and although he was excited about the prospect of becoming a home owner, he was quite nervous because of the current situation with Covid.

"I am basically waiting for the nod from my mortgage broker so I can be re-checked again and then hopefully me and my little girl can start looking for a property again."

He said the news from the UK government was "huge" for people like him that can only afford a 5% deposit and it was a big step forward.

"It's an investment for mine and my little girl's future. We no longer have that risk hanging over us and this safeguards our future," he added.

"Although I am a little twitchy about further lockdowns that could see the lenders pulling the deposits again, I am hoping we have better luck this year."

The scheme is similar to policies previously used to boost the housing market and the economy, as well as offering support to those buying a home for the first time.

The new scheme will be available to anyone buying a home costing up to £600,000, unless they are buy-to-let or second homes.

The government is offering a partial guarantee, generally of 15%, to compensate lenders if the borrower defaults on repayments.

The guarantee is designed to give lenders the confidence to offer 95% loan-to-value mortgages.