FINANCE
The 95% Mortgage
The return of the 95% mortgage, coupled with an extension to the stamp duty holiday, UHSUHVHQWV D VLJQLȴ FDQW PRYH LQ WKH KRXVLQJ PDUNHW GHVLJQHG WR VWLPXODWH UHFRYHU\ SRVW &RYLG EXW ZK\ KDYH WKH JRYHUQPHQW WDNHQ WKHVH VWHSV DQG KRZ ZLOO WKH\ ZRUN JRLQJ IRUZDUG" As a product, the 95% LTV (loan to value ratio) mortgage is nothing new. Many of us will recall the infamous, plentiful 100% mortgages that were available back in the 1990s, where swathes of Ǜ ƑƙƥȹƥĿŞĚ ċƭNjĚƑƙ îŠē ĚNJĿƙƥĿŠij homeowners were lured by the prospect of stepping onto or advancing further up the property ladder. When the spectre of negative equity began to loom in the wake of the housing market ČƑîƙĺȡ DžūƑē ĿŠ Ǜ ŠîŠČĿîŕ institutions was that mistakes wouldn’t be repeated. And yet, a decade later, the Northern Rock debacle, at a time when 115 and 125% mortgages were being bandied about, proved that lenders will always look for Ǜ ŠîŠČĿîŕ ūŠĚȹƭƎŞîŠƙĺĿƎ ĿIJ Ŀƥ means grabbing headlines and winning customers.
and 90% mortgages were removed from the market, ƥĺūƭijĺ ƥĺĚ ƑĚȹĚŞĚƑijĚŠČĚ ūIJ these at the start of March is a sign that the economy is about to receive a shot in the arm that is every bit as gamechanging îƙ ƥĺĚ ūDŽĿēȹǧǯ DŽîČČĿŠĚȦ The 95% mortgage is typically ƑĚƙĚƑDŽĚē IJūƑ Ǜ ƑƙƥȹƥĿŞĚ ċƭNjĚƑƙ ȳċƭƥ Šūƥ ĚNJČŕƭƙĿDŽĚŕNjȴȡ Džĺū ĺîDŽĚ a good credit score, who are ƎƭƑČĺîƙĿŠij ŕūDžȹƑĿƙŒ ƎƑūƎĚƑƥĿĚƙȡ and who are willing to pay the higher interest rates associated with these deals. Whilst the restriction of the purchase ŠĚĚēĿŠij ƥū ċĚ IJūƑ î ŠĚDžȹċƭĿŕē has also been lifted, these deals remain for the few rather than the many. ¹ĺĚƑĚ Ŀƙ îŕƙū ƥĺĚ ǫɼ ĺĚŕƎȹƥūȹ buy scheme. That’s the same
95% LTV mortgage which also loans the buyer an additional ǨǦȹǪǦɼ ūIJ ƥĺĚ ĺūŞĚɄƙ DŽîŕƭĚȦ This is only available for new ċƭĿŕēƙȡ îŠē ƥĺĚ ŕūîŠ Ŀƙ ĿŠƥĚƑĚƙƥȹ IJƑĚĚ IJūƑ Ǜ DŽĚ NjĚîƑƙȦ While initiatives by the Treasury sound good, the government’s incentives are only secondary to buyers having a regular, secure income. It’s because of this that the retention of jobs is so vital, and the government will look to keep both workers and employers happy with DžūƑŒȹIJƑūŞȹĺūŞĚ îŠē IJƭƑŕūƭijĺ initiatives for as long as possible, given that if the job market nosedives, so too will the housing market. ~Š ƥĺĚ ǜ ĿƎƙĿēĚȡ ċNj IJƭĚŕŕĿŠij ċūƥĺȡ they will lay the platform for solid growth across the board.
It’s a relief in a sense that caution came about when the global Coronavirus pandemic struck. Many of the premium 95
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APRIL/MAY 2021
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