Low Cost 95% Mortgages and The Wigan Property Market

The Government has come with a new plan of low cost 95% mortgages to help beleaguered first time buyers to get on the property ladder.

But is this a good move or a bad one for The Wigan Property Market ?

The Wigan Property Market is bouncing due to the stamp duty holiday introduced in the summer so does it need further help to recover, and can we afford it long term.

When someone borrows more than 75%, the banks normally take out insurance in case the buyer defaults and the bank lose money if the property gets repossessed.

When the economy is good, the risk is low - so the insurance premiums are also low for the banks – meaning they are happy to lend higher percentage loans.

But we are entering a period of uncertainty which means insurance premiums have increased significantly.

Mortgage companies are avoiding high loan to value first time buyer mortgages by offering less products.

At the start of the Coronavirus problem there were just under 400 95% loan-to-value mortgage products, now there are only 26.

Another reason for reducing the number of 95% mortgage products was that banks were swamped by the demand after lockdown was lifted.

So should the Government get involved and take on more debt ?

Well it has already been involved since 2013 with the Help To Buy scheme

Taxpayers are already guaranteeing £16.049bn of loans for 224,133 for first time buyers.

1,707 first time buyers in Wigan have used the Help to Buy scheme to help buy their home, relying on the Government to guarantee them on average £39,894

Some have argued it would be better to spend that public money on delivering affordable rental properties ?

But isn’t it better if people own their home rather than rent.

There in no doubting the initiative will have positive effects on the property market.

Firstly, with the stamp duty holiday due to finish by the end of March, and there may be some stalling of sales after this.

Secondly, the very popular Help to Buy scheme mentioned above also finishes at the end of March 2021.

This initiative could be a positive replacement and stabilise the property market.

Thirdly, first time buyers are the powerhouse of a healthy property market that impacts on many other business sectors.

Finally, the Government are hoping a healthy property market will help power us out of recession.....only time will tell.