The UK government is set to unveil a new scheme aimed at helping first-time homebuyers get on the property ladder. The initiative will see the government guarantee mortgages for buyers who can afford a deposit of just 5%. The plan, part of a range of measures to be announced in the Budget, seeks to turn “generation rent” into “generation buy”. It’s inspired by a similar scheme that ran until 2016, which helped over 100,000 households buy homes.

The Chancellor of the Exchequer, Rishi Sunak, believes that owning a home is a dream for many, and the government should support those who cannot afford large deposits. The scheme will be available to all buyers of properties costing up to £600,000. It’s anticipated that several major lenders, including Lloyds, Natwest, Santander, Barclays, and HSBC, will offer these 95% mortgages from next month.

The housing market has been buoyant during the pandemic, with a temporary cut in stamp duty fuelling a mini-boom. Yet, the high cost of deposits has locked many potential buyers out of the market. Critics argue that while the scheme may help some, it could also inflate house prices, making it even harder for others to buy. They suggest a more sustainable solution would be to increase the supply of affordable homes.

In response, the government has pledged to invest £12bn in affordable housing over the next five years, aiming to support up to 180,000 new homes. It has also extended the stamp duty holiday until the end of June, with a tapered end until September.

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