Twelve months on from the soft launch of house builders’ scheme Deposit Unlock, Freddie Scarratt takes a fresh look at how the initiative is filling the void created by the wind up of Help to Buy and the government’s mortgage guarantee scheme.

Life for many at the moment is a source of increasing financial struggle, including those stuck in ‘generation rent’ trying to hang on to the dream of one day owning their own home. Even before the cost-of-living crisis reared its unforgiving head across food, fuel, heating and more, the larger and larger deposits needed to secure a mortgage were the biggest barrier to property ownership.

This was especially the case in the new build sector, where 95% loan-to-value mortgages had simply ceased to exist. And that was inevitably making a quality, newly built, well-insulated home an impossibility for many first-time buyers.

Long before the current economic challenges, the imminent closure of the government’s Help to Buy scheme was exacerbating this problem. Having been the driving force behind higher LTV lending in the new build space for seven years, the winding up of the government’s successful scheme to full closure in March 2023 was already creating a concern for house builders seeking an assurance that their commitment to new developments would result in properties they could comfortably sell.

Step forward Deposit Unlock: the innovative insurance-led solution devised for and funded by the house building industry in close partnership with the lending community, of which we are proud to have been the architects and now manage. Twelve months on from the scheme’s soft launch – designed as a commercial, long-term solution at zero cost to the taxpayer to unlock the return of high LTV mortgages in the new build space – its multiple benefits to all major stakeholders have been thrown into stark relief.

Because arguably, with the cost-of-living crisis biting hard for many potential house buyers, recessionary concerns and a housing market that while still busy is showing signs of slowing down, Deposit Unlock is a solution that’s now more important than ever.

Let’s look at lenders first. Deposit Unlock effectively enables them to enter the new build space with 95% loan-to-value mortgages on both flats and houses with a free mortgage indemnity policy, protecting them to 60% LTV.

Both Newcastle Building Society and Nationwide have embraced the scheme, with other lenders set to join over the summer. It is providing lenders with peace of mind on new build housing and, importantly, flats as we enter the post-Help to Buy market. Both Knight Frank1 and Savills2 believe that the house builder scheme will play a key role in supporting the lenders in plugging the gap that will be created after the end of Help to Buy scheme in 2023.

Halifax’ recent decision to offer a new build product under the Government Mortgage Guarantee Scheme3 (limited to just houses) further demonstrates the need for a long-term sustainable private sector solution to the high LTV new build space. The government’s scheme offers 15% protection showing that even the UK’s largest lender is looking for a mortgage indemnity solution to offset risk at the 95% LTV level – something Deposit Unlock is already offering and will continue to long-term after the government’s scheme end date of next March.

From a house builder’s perspective, the 17 founders are now being joined by an additional 50 house builders who all see the need for and value of an industry-led solution to the 95% LTV space post HTB.

As we enter choppier waters around the housing economy, a scheme which is owned by the house builders’ – and already backed by the 2nd largest UK lender in Nationwide – is only going to put them in a strong position to deliver constant sales for shareholders and owners. For the first time, house builders and the House Builders Federation have the means to provide a stable 95% lending environment for all economic environments.

From a customer’s perspective, Deposit Unlock enables them to access a straightforward 95% LTV mortgage product for new build properties at competitive market rates, given the lender’s receive a great depth of protection at no cost to themselves. The competitive rates mean customers, typically first time buyers, are put in the best position financially for their future – without having to worry about equity loans or shared ownership. A simple solution, for a simple but substantial problem.

With the end of Help to Buy and the Government Mortgage Guarantee Scheme in sight, Deposit Unlock will continue to see increased participation from house builders and lenders, right across the UK, and provide first time buyers with the means to take that longed-for step onto the property ladder.

What is Deposit Unlock?

Deposit Unlock is a UK-wide scheme that enables first time buyers and existing homeowners to purchase a new-build home with a 5% deposit. Under the scheme, housebuilders use a percentage of the proceeds of each sale to pay for mortgage insurance for the lender. This provides the lender with free protection allowing them to offer their borrowers competitive mortgage rates.