HMRC launches mortgage guarantee scheme from 19th April 2021

First time buyers, home movers and previous homeowners will be able to access 95% loan-to-value mortgages with only 5% deposit under the new scheme launched by HMRC. Now, what does this mean to borrowers exactly? There is no actual difference between the 95% mortgages taken through this scheme or the ones taken outside of it.

However, this scheme will provide lenders with a guarantee that the Government will cover some of the costs if the lender loses money.

To exemplify this, let’s use a £100k mortgage example. The deposit is 5% and the HMRC’s guarantee will cover 95% of all losses above 80% of the mortgage. Let’s say the lender has recovered £80k and is at a loss of £15k after the deposit. The HMRC will guarantee 95% of the loss, which comes up to £14.250, leaving the loaner at a loss of only £750. If a loaner had recovered £90k, the guarantee would be 95% of the remaining £5k, leaving the loaner at a loss of only £250. Any loss below 80% is not covered by this scheme.

More information on this scheme can be found on the HMRC webpage.