Mortgage guarantee scheme: Could it benefit first-time buyers in the East Riding?

First-time buyers in the East Riding could particularly benefit from the Government-backed 5% deposit mortgage scheme, analysis suggests.

Thursday, 11th March 2021, 12:25 pm
The scheme will be available to homeowners as well as first-time buyers looking for a property worth up to £600,000. Photo: PA Images

The new mortgage guarantee scheme, revealed in Chancellor Rishi Sunak’s Budget, will be available to current homeowners as well as first-time buyers looking for a property worth up to £600,000.

What will it mean for first-time buyers in the East Riding?

In December, first-time buyers in the area spent an average of £160,290 on their property, according to Land Registry figures.

A 5% deposit on a home costing this much would be £8,010 and raising the 95% mortgage would require a household income of £42,300.

That’s based on what housing charity Shelter says is a “typical” loan to income ratio of 3.6 – that is, a mortgage lender will allow a household to borrow 3.6 times their gross income for a home purchase.

Office for National Statistics data reveals that the gross median salary of a full-time employee in the East Riding of Yorkshire was around £31,590 in 2020.

The median is a measure used to exclude extreme values which could skew the average.

The 2019-20 English Housing Survey reveals 45% of first-time buyer households were couples without dependent children, and 31% were couples with dependent children.

Two people living and looking to buy their first home together in the East Riding of Yorkshire, with a combined median salary of £63,180, could therefore particularly benefit from the scheme.

Richard Donnell, research director at UK property portal Zoopla, said supporting buyers with small deposits is key to widening access to home ownership.

He added: “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% 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.”