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Residential: A Guide to 95% Mortgages

Wed 24 March 2021

First-time buyer purchases fell by -13% in 2020, the knock-on effect of a closed housing market in spring and stricter mortgage lending; figures began to recover at the back end of the year, ending -2% below 2019. However, it is no secret that due to being priced out of the market, it is becoming harder for younger people to get onto the property ladder. Earlier this month in the Budget, Rishi Sunak announced a 95% mortgage guarantee scheme for lenders, meaning that 95% mortgages could be approved to encourage first time buyers, and those with a lower deposit. Rosie Spours, Branch Manager/Valuer in our Alnwick Branch, explains the Chancellor’s initiative for ‘generation rent’.


A 95% mortgage is a loan for 95% of a property’s price, where you put down a 5% deposit to cover the rest. For example, if you wanted to buy a house worth £200,000 with a 95% mortgage, you would put down £10,000 of your own money and borrow the remaining £190,000.


The impact of coronavirus on the economy has made it much harder to get a 95% mortgage - in fact, there were only three 95% mortgages still on the market in February 2021, down from 273 in March 2020. However, the government has announced that it will be launching a 95% mortgage guarantee scheme, which has prompted several major banks to commit to launching new deals from April 2021. 


95% mortgages are theoretically available to all buyers, whether they are first-time buyers of not. Saving up a 5% deposit is only half the battle; you’ll need to be able to prove that you earn enough to meet the monthly mortgage repayments before any lender will consider giving you a 95% mortgage.


Your salary is an important starting point, but it isn’t the only factor lenders will take into account. They'll assess the full range of your income, regular outgoings and any debt, among other things, when working out whether you can afford a mortgage. They'll also 'stress test' your finances; this means checking whether you could still afford the mortgage payments if interest rates were to rise. If you're currently furloughed due to COVID-19, lenders will generally only take your furloughed income into account, however some may be more flexible if you can provide a letter from your employer to say they're paying you 100% of your salary, or that you'll be returning to work on a set date. Speak to a mortgage broker if you want guidance on getting yourself into the best possible position before applying; we would be happy to point you in the right direction if you are unsure of who to talk to.


To increase your chances of qualifying for a 95% mortgage, you’ll need a good credit score, with a history of paying bills, loans and credit cards on time. If you aren’t sure what your credit score is, you can sign up to an online credit score calculator such as Experian or talk to a mortgage advisor.

Making sure that you're registered on the electoral roll is a quick and easy way of boosting your credit score.


The sales market is very competitive at the moment, meaning that stock is being sold very quickly, this makes it even harder to find your dream first home as there are less properties to choose from. In Northumberland, we are seeing a high level of buyer demand, particularly those looking for lower priced property as investment in second homes or holiday homes. Unfortunately, this is a disadvantage to first time buyers as it generates further competition.

In order to ensure that you are the first to know about suitable properties that are coming to the market, we would suggest making sure that you are registered with local agents and ensuring that you are in a position where you can proceed with a sale quickly – a financial advisor will be able to get you in the best possible position before expressing interest on a property.

Top Tips:

  • Financial advice is essential
  • Register with agents
  • Know what you are looking for in a property
  • Be prepared to compromise
  • Familiarise yourself with area within budget
  • Build a relationship with your local agent

If you would like to register your property interests with our team, please contact your local branch: