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What’s changing in the mortgage market right now (and what isn't)

5% deposits? 40-year fixed mortgages? With new promises in the budget and headlines about mortgage rates and lending terms, it's easy to get overwhelmed. We'll talk you through the latest news.

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Mortgages are making headlines a lot at the moment — and there are definitely a few things to be excited about. But all of the coverage can be a little overwhelming (and a little confusing). It's easy to think that there are lots of changes in store for all of us — whether we're looking to buy for the first time, move house, or remortgage. And it feels like things are changing fast.

The truth is, in a lot of cases the changes to mortgages won’t make a huge difference. If you’re a first-time buyer struggling to save a deposit or if you’re looking lock in a rate for a very long mortgage term, there may be good news. For the rest of us, things are largely the same — but with some very good interest rates. 

Confused? Don’t worry. We’ll talk you through it. 

So, do all of these announcements mean anything to you? Let’s start with the most recent budget announcement.

Who benefits from 5% deposits?

The new government guarantees for 5% deposits made a lot of noise in the latest budget, but what do they mean? You might know that 5% deposit mortgages aren’t totally new, but now the government will be guaranteeing those loans — so banks feel more comfortable loaning up to 95% of a home’s value.

Theoretically, this should mean more mortgages available for those struggling to save up a deposit. And as saving for a deposit can be the biggest hurdle to getting on the housing ladder for so many, this could be a lifeline to some first-time buyers.

Although we'll have to see how these actually come to market — and how competitive the rates end up being.

This is all part of the government’s plan to turn “Generation Rent” into “Generation Buy”. If you’ve been finding a 10% deposit out of reach, that might be great news for you. If you already own your home and have been building equity, it probably won’t be a huge shift.

Although there has been a lot of news surrounding mortgages, it’s important to remember that most of the small print is the same."

What about 40-year fixed mortgages?

Another reason mortgages have been in the headlines was the announcement of the fixed 40-year mortgage from Habito. What that essentially means is that, in some cases, the amount of time it takes you to pay back your mortgage can be stretched for as long as 40 years — and you can fix the interest rate in advance. Now, having mortgages stretch into the decades isn’t anything new — but what's interesting about this is that you can get a fixed rate for that term, so there's a level of certainty you wouldn't normally find. Of course, with longer-term mortgages you’ll often end up paying a lot of money in the long run.

Generally, interest rates are worse over longer loan periods — but it will save you from having to remortgage again and again. So, if for some reason you need very low monthly payments and want to spread them out or want to be sure you'll have the same rate for 40 years, it may be a good choice.

Remember: The nuts and bolts stay the same

Although there has been a lot of news surrounding mortgages, it’s important to remember that most of the small print is the same. Your income and credit will still be crucial factors in deciding how much you can borrow and at what interest rates.

You’ll still have to decide how you want to pay it back — most people choose a repayment mortgage on a fixed-rate, but tracker and discounted options are also out there. So the process of getting a mortgage will largely be — well, totally the same.

(Feeling overwhelmed? Don’t worry, our complete mortgage guide breaks it all down).

It can be exciting seeing big announcements in the news about the housing market — especially when they’re tied to affordability and making the property ladder more accessible for first-time buyers. But it’s important to take a little look beyond the headlines to see what’s really happening.

The 5% deposit mortgages with government backing could be a huge boost for first-time buyers — and 40-year fixed mortgages might be a big deal for those who want to be locked into a rate for a long time to really spread out their payments (and don’t mind more interest in the long run). But for most of us, it will be the very low interest rates that we’ve seen over the past year that will make the biggest impact.

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