Following news that prospective first time buyers may only need a 5% deposit in order to get onto the property ladder, Holly Andrews, MD & Mortgage Expert, KIS Finance, explains what buyers need to consider before taking out a 95% mortgage.

Given the huge escalation in house prices over the last couple of years, 95% mortgage deals will certainly be a tempting option for first-time buyers. Only having to save a 5% deposit instead of the usual 10 or 15 percent may come as very welcomed news for those that are struggling to save anything significant amid the cost of living crisis.

However, a 95% mortgage may not be an appropriate solution for everyone.

Requiring a bigger mortgage will only really be available to those that can afford the monthly repayments. Quite simply - the bigger the mortgage, the higher the repayments will be. Given that the loan to value also plays a large part in determining the interest rate offered on a mortgage, 95% mortgages will likely attract some of the highest mortgage rates in the market.

So it’s likely that many applications may be turned down due to affordability, but even for those that do qualify, taking on and committing to big monthly repayments right now could be a risky move. With living costs showing no signs of easing, some people could find themselves getting into trouble not being able to cope with rising costs.

Another concern for those buying with much smaller deposits is the risk of falling into negative equity. This is when the value of a property falls below the amount outstanding on the mortgage secured against it.

Full press release

What buyers need to consider before taking out a 95% mortgage

Media contact

Phoebe Griffits
phoebe@kisfinance.co.uk
01884 820110
@PhoebeGriffits

30 June 2022