New mortgage scheme for five per cent deposits 'won't help' says Sheffield expert

Mortgages offering a deposit of five per cent under a new government guarantee scheme won’t help first time buyers, a Sheffield expert says.
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The policy, announced in the Budget, is designed for first-time buyers, but the launch comes as average house prices continue to rise to record levels. Some lenders such as Halifax which is part of Lloyds Banking Group, and Barclays have also said that these products will not be available for new-build properties.

Linda Crapper, consultant at Saxton Mee and a Member of the National Association of Estate Agents, said: “I don’t think it will help, especially as it is not being offered on new builds.

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"I also think the interest rates are putting first time buyers off. Rather than offering a deposit of five per cent, it would be better to lower the interest rate along with the deposit.”

The average house price in Sheffield is between £220,000-£270,000. Would a 5% deposit help you buy this house, in Tulip Tree Close, Beighton, on the market for £235,000 with Purplebricks?The average house price in Sheffield is between £220,000-£270,000. Would a 5% deposit help you buy this house, in Tulip Tree Close, Beighton, on the market for £235,000 with Purplebricks?
The average house price in Sheffield is between £220,000-£270,000. Would a 5% deposit help you buy this house, in Tulip Tree Close, Beighton, on the market for £235,000 with Purplebricks?

Some of the new mortgage rates are close to 4% for a two-year fixed rate deal, but Linda says these are too expensive.

"What is the point of helping out with one hand and taking it back with the other? It is a bit back-to-front,” she added.

Rates on NatWest's new 95 per cent mortgages will start at 3.9 per cent. Lloyd Cochran, head of mortgages at NatWest, said: "It reflects the extra risk the bank is taking on. I think over the long term that is a pretty competitive rate for customers.

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"One of the things we do is ensure that the customer can afford that rate. We also ensure... the customer can afford that loan if interest rates were to rise."

However, analysts say rates could be cut significantly, by as much as 0.75 of a percentage point, for borrowers able to stretch to a 10 per cent deposit.

Linda added: “I can’t see there being a big take-up and I do feel not including new builds is a mistake because first time buyers can just walk in and there’s nothing else to do.”

Chancellor Rishi Sunak said: "Every new homeowner and mover supports jobs right across the housing sector, but saving for a big enough deposit can be hard, especially for first-time buyers.

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"By giving lenders the option of a government guarantee on 95 per cent mortgages, many more products will become available, boosting the sector, creating new jobs and helping people achieve their dream of owning their own home."

However, lenders will still carry out affordability checks. Anyone who has lost a job, or whose income has been sporadic owing to the pandemic's effect on employment may find it difficult to secure a mortgage.

House prices have been rising - partly because of government stimulus, and there are concerns too about the potential for some to fall into negative equity if this is followed by sharp falls in property values.

To see more properties on the market in Sheffield right now join our Facebook group all about property – click https://www.facebook.com/groups/thestarproperty to become a member. And to read more great articles on homes and gardens, please visit the dedicated section of The Star’s website.

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In these confusing and worrying times, local journalism is more vital than ever. Thanks to everyone who helps us ask the questions that matter by taking out a digital subscription or buying a paper. We stand together. Nancy Fielder, editor.

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