From being frozen out of the mortgage market at the height of the pandemic to the introduction of a mortgage guarantee scheme with rates as low as 2%, it’s been a rollercoaster year for homebuyers with smaller deposits. Here, we walk you through everything you need to know about your mortgage options now.

Until last week’s Budget, the prospects for home seekers with a deposit of 5% of a home’s value looked bleak.

Over the course of the pandemic, lenders have largely withdrawn their 95% loan-to-value (LTV) products amid uncertainty over the outlook for house prices and jobs. As a result, there are now just five fixed and variable rate products available for those looking to buy a property with a 5% deposit, down from a peak of almost 400 last March, according to Moneyfacts.

Help arrived in last week’s Budget in the form of a new mortgage guarantee scheme applicable to both new and existing homes. The government will issue a guarantee to lenders that sign up for the portion of any mortgage they provide over 80% LTV – so if a homeowner defaults on their 95% LTV mortgage, the government is responsible for repaying 15% of the property value to the lender.

Few people default on their mortgage: less than 1% of outstanding mortgage balances are in arrears, according to the Bank of England, but the guarantee enables lenders to treat someone with a 95% LTV mortgage in the same way they would someone with an 80% LTV mortgage. Crucially, that means cheaper rates, or at least in theory it should.

Previous mortgage guarantee schemes have had poor take up from lenders and at times the cost of the loans hasn’t quite matched with the government’s ambition, but this version looks different.

At least half a dozen lenders have signed up already and it looks like rates for new 95% mortgages may come in under 2% when you fix for two years - that would be a game changer for large numbers of buyers when the scheme launches in April.

For properties costing more than that threshold, high LTV mortgages remain challenging. Earlier this week later life finance expert David Forsdyke mapped out how parents and grandparents can help family members get a foot on the ladder.

For those interested in buying a new-build home, Help to Buy has just had a pre-spring clean. The scheme is now only available to first time buyers, runs until March 2023, and enables you to purchase a new home with a deposit as low as 5%. Through this scheme, the government will lend you a maximum of 20% of the sale price up to the regional limit in your area. In London that moves up to 40%.

We have access to 26 lenders specialising in the Help To Buy market at the moment, with two year fixed rates available as low as 1.34%.

If you, a family member or friend is looking to buy a property in 2021 and would like to discuss the options when it comes to securing a mortgage, speak to us. We know all the major lenders in the marketplace and can help find the most cost-effective and suitable mortgage for you.