Martin Lewis has once again shared some top advice. This time, it's for homebuyers in Scotland who can benefit from a new five per cent deposit mortgage scheme.
The scheme will be available to current homeowners as well as first-time buyers looking for a property for up to the cost of £600,000 but the money-saving guru is skeptical.
The Money Saving Expert explains on his website that, under the scheme, first-time buyers, home movers and previous homeowners with a 5% deposit will once again have access to 95% loan-to-value mortgages - which means the loan is for 95% of the property's value.
The initiative, which is available from April, is designed to increase the appetite of lenders to offer high loan-to-value (LTV) mortgages to credit-worthy customers across the UK.
Speaking during a special Budget edition of the Martin Lewis Money Show Live on Thursday, he said: “These aren’t special mortgages, it just means the [UK] Government is helping lenders provide them.
“My view? Forget five per cent if you can and push to a 10 per cent deposit as it will give you a cheaper rate.
“As a result, you will spend less over the years.
“Ultimately for me, saving in a Lifetime ISA to get the 25 percent boon, waiting until later and having a lower mortgage rate is a better financial decision.
“But of course, choosing the house you live in is not just a financial decision, but a lifestyle one, too.
“You will have to make that balance yourself, but if you go for the five percent now, you’ll probably end up paying proportionally more for it because it’s going to be a costlier mortgage than you would if you had a 10 percent deposit.”
The new scheme was announced in the Spring Budget and will give buyers the option to fix their initial mortgage rate for at least five years.
The scheme will be available for new mortgages up to December 31, 2022 and will be available on new or existing properties.
Richard Donnell, research director at Zoopla, insisted the scheme is key to making home ownership more accessible.
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He said: "Supporting buyers with small deposits is key to widening access to home ownership for a part of the mortgage market that has been under-served."
He continued: "Our analysis shows the scheme will have the greatest benefits for buyers in lower value housing markets in northern England and Scotland, where a 95 per cent mortgage is more attainable.
"The scheme will have less impact for buyers in southern England, where high house prices are a major barrier to being able to afford a 95% mortgage. This all supports the levelling up narrative and policy approach of Government."
