The new 95 per-cent deposit scheme has been introduced in England today. 

Buyers are now able to secure a mortgage on a property of up to £600,000 with just a five per-cent deposit from today, Monday 19 April. 

Chancellor Rishi Sunak announced plans in his latest Budget to turn 'generation rent' into 'generation buy' with a new 95 per-cent deposit scheme. 

Here's everything you need to know about how it works, who's eligible and how to get on the property ladder: 

What is the 95 per-cent deposit scheme?

The Chancellors plan is aimed to help buyers with small deposits get on the property ladder.  

Under the new scheme, which launches today, home buyers will be able to purchase homes priced up to £600,000 with a deposit of just five per-cent.  

The government will offer lenders the guarantee they need to provide mortgages that cover the other 95 per-cent, subject to the usual affordability checks.

The Argus:

People will be able to get on to the property ladder with a smaller deposit. (image-stock)

Who is eligible? 

The scheme will help first time buyers or current homeowners secure a mortgage with just a five per-cent deposit to buy a house of up to £600,000.

Second homes and buy-to-let properties are not eligible for the scheme, you must be buying a property to live in yourself. 

Both new and existing properties of up to £600,000 are eligible and you will need to be applying for a mortgage of between 91-95 per-cent of the property value. 

The government have said this will provide an affordable route to home ownership for aspiring home-owners.

How does the scheme work?

The 95 per-cent mortgage scheme allows prospective buyers to borrow between 91 and 95 per-cent of the property's total value at the time of purchasing.

The remaining percentage of the property value will be made up of your deposit, so between nine and five per-cent. 

Under the terms of the scheme, the government guarantees the portion of the mortgage over 80 per-cent (so, with a 95 per-cent mortgage, the remaining 15 per-cent is guaranteed by the government).

This means lenders will be partially compensated by the government if a homeowner fails to pay their mortgage - this is why it's sometimes called a 95 per-cent mortgage guarantee. 

The guarantee will be valid for up to 7 years after the mortgage is originated, evidence shows that loans are unlikely to default after such a period has elapsed.

The scheme is intended as a temporary measure and will be open for new mortgage applications from April 2021 to December 2022.

The Argus:

The scheme is only temporary and lasts until December 2022 (stock).

This is because the government scheme is intended to be in response to the pandemic rather than a symptom of a longer-term structural change in the mortgage market.

The government will review the continuing need for the scheme towards the planned end date, and determine whether extending the period of eligibility for new mortgages would continue to deliver benefits for prospective homeowners.

The scheme is one of a range of flexible homeownership options available. These include Help to Buy, Shared Ownership and the First Homes Scheme.

Which lenders are offering the 95 per-cent mortgage guarantee? 

The scheme is now available from lenders on high streets across the country, with Lloyds, Santander, Barclays, HSBC and NatWest launching mortgages under the scheme today and Virgin Money following next month.

Housing Secretary Rt Hon Robert Jenrick MP said:

"For too many people, no matter how hard they work, home ownership can seem out of reach. One of the biggest divides in our country has been between those who can afford their own home and those who cannot."

As part of the government's plan to turn 'generation rent' into 'generation buy' they have committed to helping people with smaller deposits access the housing market.

Mr Jenrick said: "The new mortgage guarantee scheme which comes into effect today will give providers the confidence to lend and help families and young people get on the property ladder without the prohibitive burden of a large deposit.

"Despite the challenges faced over the past year, the government has intervened to protect jobs, support builders and buyers to help keep the housing market healthy. Today’s 95 per-cent mortgages launch further strengthens our commitment to build back better from the pandemic."