First-time buyers in Eden could particularly benefit from the Government-backed five per cent deposit mortgage scheme, analysis suggests.
The new mortgage guarantee scheme, revealed in Chancellor Rishi Sunak’s Budget, will be available to current homeowners as well as first-time buyers looking for a property worth up to £600,000.
But housing charity Shelter has criticised the Government’s latest attempt to help people onto the housing ladder as “peddling pipe dreams”, with many private renters not earning enough to afford a large mortgage.
What will it mean for first-time buyers in Eden?
In December, first-time buyers in the area spent an average of £185,330 on their property, according to Land Registry figures.
A five per cent deposit on a home costing this much would be £9,270 and raising the 95 per cent mortgage would require a household income of £48,910.
That is based on what housing charity Shelter says is a “typical” loan to income ratio of 3.6 – that is, a mortgage lender will allow a household to borrow 3.6 times their gross income for a home purchase.
Office for National Statistics data reveals that the gross median salary of a full-time employee in Eden was around £30,710 in 2020.
The median is a measure used to exclude extreme values which could skew the average.
The 2019-20 English Housing Survey reveals 45 per cent of first-time buyer households were couples without dependent children, and 31 per cent were couples with dependent children.
Two people living and looking to buy their first home together in Eden, with a combined median salary of £61,410, could therefore particularly benefit from the scheme.
Richard Donnell, research director at UK property portal Zoopla, said supporting buyers with small deposits is key to widening access to home ownership.
He added: “Our analysis shows the scheme will have the greatest benefits for buyers in lower value housing markets in northern England and Scotland, where a 95 per cent mortgage is more attainable.
“The scheme will have less impact for buyers in southern England, where high house prices are a major barrier to being able to afford a 95% mortgage. This all supports the levelling up narrative and policy approach of Government.”
The scheme, available from April, will provide a guarantee to lenders across the UK who offer mortgages to people with a deposit of just five per cent.
Buyers will also have the option to fix their initial mortgage rate for at least five years, giving them certainty over their repayments.
It will be available for new mortgages on new or existing properties up to December 31 2022.
But Polly Neate, Shelter chief executive, criticised the Government’s latest attempt to help people onto the housing ladder as “peddling pipe dreams”.
She said: “Sadly, the mortgage guarantee announced by the Chancellor is pure window dressing.
“Research shows it won’t help most renters and has no hope of turning ‘Generation Rent’ into ‘Generation Buy’.
“Two-thirds of private renters have no savings at all, and there is no way they can scrape together the cash needed to afford a 5% deposit, nor do they have the kind of income that would support a huge mortgage.”
She added that the Government should provide “meaningful solutions” to the housing crisis, including building more social homes that people can afford to live in.
The Treasury has been contacted for comment.
- Will you be taking advantage of the mortgage guarantee scheme? Has the Government gone far enough to help first-time buyers? We’d love to know what you think. Email nicoler@barrnonmedia.com
