UK banks Lloyds Banking Group PLC (LON:LLOY), Barclays PLC (LON:BARC), HSBC PLC (LON:HSBA), NatWest Group PLC (LON:NWG) and Santander today launched new mortgages under a government scheme where certain buyers only need a 5% deposit to buy a home.
It comes on the same day that UK house prices were calculated to have surged 2.1% this month to a new all-time high of £327,797, according to Rightmove.
Recent rises in house prices have been driven by a lack of supply in the market, the property website said, with some estate agents reporting that potential sellers are holding off until they have received the coronavirus vaccine.
The scheme, which was brought back to life by Chancellor of the Exchequer Rishi Sunak in his budget last month, involves the government offering lenders the guarantee needed to provide 95% mortgages.
Among the initial products launched by the high street banks, which will be joined by Virgin Money UK (LON:VMUK) next month, the new mortgage come at an interest rate just below 4% for a two-year fix.
It is meant to help first-time buyers and current homeowners, and lenders will still carry out the usual affordability checks.
Housing Secretary Robert Jenrick said it will give banks “the confidence to lend and help families and young people get on the property ladder without the prohibitive burden of a large deposit”.
He added: “In recent years we’ve reversed the trend and seen a positive increase in owner-occupiers. We’re determined to build on this through the range of flexible ownership options which help ensure home ownership is achievable. We want to match the ambitions of aspiring homeowners up and down the country.”