Mortgage guarantee scheme: how much will first time buyers in Aylesbury's region benefit from new 5% deposit plan?

First-time buyers in Buckinghamshire could struggle to access the Government-backed 5% deposit mortgage scheme, analysis suggests.

Thursday, 11th March 2021, 3:15 pm
Updated Thursday, 11th March 2021, 3:16 pm

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 Buckinghamshire?

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Analysis suggests Buckinghamshire residents will struggled to become homeowners under the Chancellor's new scheme

In December, first-time buyers in the area spent an average of £309,970 on their property, according to Land Registry figures.

A 5% deposit on a home costing this much would be £15,500 and raising the 95% mortgage would require a household income of £81,800.

That's based on what 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 Buckinghamshire was around £36,090 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% of first-time buyer households were couples without dependent children, and 31% were couples with dependent children..

Two people living and looking to buy their first home together in Buckinghamshire, with a combined median salary of £72,180, could therefore struggle to benefit from the scheme with the minimum deposit required.

Polly Neate, Shelter chief executive, 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. It is not fair to peddle people pipe dreams."

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 scheme, available from April, will provide a guarantee to lenders across the UK who offer mortgages to people with a deposit of just 5%.

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.

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% 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 Treasury was contacted for comment.