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95% mortgages on the rise?

The amount of 95% mortgage deals available has risen sharply in the past couple of years, however very few people are being granted a home loan with just a 5% deposit; not only is it hard to obtain one, experts suggest that it is possibly not very sensible either.

95% mortgages are available, from a variety of small building societies, and also from some of the UK's biggest lenders. Many require the borrower to have a guarantor, who agrees to produce capital if lenders are left with a loss. Deals without the need for a guarantor tend to have high interest rates, in some cases more than 6% a year.

In 2011, just 0.36% of all new mortgage funds were lent to borrowers who were able to provide a deposit of 5% or less of the purchase price, as shown in statistics published by the Financial Services Authority (FSA).

It has been mentioned that the number of people able to borrow a 95% mortgage may be boosted this year because of the Government's recently launched ‘New Buy mortgage guarantee initiative’. The aim of the initiative is to help the builders involved sell about 100,000 newly built flats and houses in England. This will let a selection of big lenders offer 95% mortgages to the prospective buyers, rather than the standard 80% or 85% loan currently available.

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