Aspiring buyers in Scotland could benefit from a new 5 percent deposit mortgage system starting next month.

The mortgage guarantee scheme will be available to current owners as well as first-time buyers looking for property up to £ 600,000.

The initiative will be available from April and is designed to increase the appetite of lenders to offer high loan-to-value (LTV) mortgages to creditworthy customers across the UK. The program will provide collateral to lenders across the UK who offer mortgages to people with a deposit of just 5 percent.

However, Money Saving Expert Martin Lewis encourages all who consider it to choose carefully.

Speaking at a special Budget edition of the Martin Lewis Money Show Live On Thursday, the consumer champion explained the new program to viewers and said, “These are not special mortgages, it just means that the [UK] The government helps lenders provide them.

“My advice? Forget five percent if you can and push for a 10 percent deposit as that will give you a cheaper rate.

The new program was announced in the spring budget and will give buyers the opportunity to fix their initial mortgage rate for at least five years, giving them certainty about their repayments.

The program will be available for new mortgages until December 31, 2022 and will be available on new or existing properties.

Contrary to Martin’s warning, Richard Donnell, research director at Zoopla, said: “Supporting buyers with small deposits is essential to expanding access to homeownership for a part of the mortgage market that has been underserved. “

He continued: “Our analysis shows that the program will have the greatest benefits for buyers in lower-value housing markets in the north of England and Scotland, where a 95% mortgage is more accessible.

“The program will have less impact for buyers in the south of England, where high house prices are a major obstacle to being able to pay a 95% mortgage. All of this supports the narrative and political approach of government leveling. “

According to Zoopla’s research, mortgage for people with a deposit of less than 10% remains limited – only 4% of mortgages were at this level in the third quarter of 2020 – compared to almost 7% in mid-2019.

Numerous low deposit mortgages disappeared from the market last year due to concerns about the economy in general, although many lenders have recently reverted to 10 percent lending on deposits.

Under the new scheme, the UK government will offer to take on some of the risk of low deposit loans, meaning lenders would have some protection against potential losses.

Low deposit loans are often seen as riskier because borrowers could end up with negative equity if home prices drop, which means they owe more than their property’s value.

Lenders will be able to purchase a government guarantee that compensates them for a portion of their losses in the event of foreclosure.

In the first signs that borrowers will have a decent choice of offers, some major high street lenders have already shown their support for the initiative.

Michelle Andrews, Head of Home Buyers at HSBC UK, said: “Here at HSBC UK we are committed to helping people access or rise through the ownership ladder.

“This program will make a real difference by allowing more first-time buyers and movers, with a minimum down payment of 5%, to obtain the keys to their new home, and we are delighted to play our part.

“Our team of dedicated mortgage advisors will be ready to provide expert advice and guidance on this program starting April 19.”

Lloyd Cochrane, Mortgage Manager, NatWest Group, said: “We are delighted to be one of the lenders participating in the mortgage guarantee program.

“For clients with small deposits looking for a mortgage, especially younger or first-time buyers, saving for a large deposit can often be difficult, and we know people in these groups are among the hardest hit by the effects of the pandemic. “

David Postings, Managing Director of the UK Finance Trade Association, said: “The banking and finance industry supports innovation in the mortgage market, especially measures that enable borrowers to realize their dream of homeownership, through lower deposits.

Don’t miss the latest news from across Scotland and beyond – Sign up for our daily newsletter here.