New research from estate agent comparison site, GetAgent.co.uk, looks at how this impacts the market and where homebuyers are due to save the most, based on the difference between a 15% and 5% mortgage deposit on the current average house price.
With the average UK house price currently coming in at £251,500, homebuyers purchasing a home with a 5% deposit instead of the average requirement of 15% are set to save £25,150.
According to the numbers, the biggest saving will be in London, with homebuyers seeing the initial financial hurdle of a mortgage deposit reduce by just shy of £50,000, requiring just £24,803 as a deposit instead of the average of £74,410 currently required.
However, even in the North West and Northern Ireland, a reduction of 10% in the required mortgage deposit will save homebuyers between £14,000-£15,000.
At a local authority level, Haringey is home to the biggest saving of all areas of the UK. The area comes in just below the £600,000 threshold with an average property price of £568,561. Currently, a 15% deposit requires homebuyers to put together a savings pot of £85,284. However, with the 5% government deposit scheme, this will fall by a huge £56,856 to just £28,428.
Merton, Lambeth and Barnet are also home to some of the biggest savings for homebuyers able to purchase with a 5% deposit. Each borough will see a reduction in the savings required for a mortgage deposit of between £53,000 and £56,400.
St Albans is home to the biggest saving outside of London. A 15% deposit currently equates to £79,481 in the area, however, a 5% deposit will mean homebuyers can secure a mortgage with £26,494; a saving of £52,987.
Southwark, Three Rivers, Mole Valley, Kingston upon Thames and Ealing also rank high, with a 5% mortgage deposit saving homebuyers upward of £50,000.
Burnley is home to the lowest average house price in the UK at £97,667 with a 15% mortgage deposit equating to £14,650. Despite this lower cost, a 10% reduction in the required mortgage deposit will still see homebuyers there save nearly £10,000.
Colby Short, Founder and CEO of GetAgent.co.uk, commented: “If the current stamp duty holiday is the cherry on top in terms of property market incentives, then the announcement of government-backed 95% mortgages is most certainly the cake.
"It should go a long way in helping a lot of hard-pressed homebuyers get that first foot on the ladder by considerably lowering the initial cost of securing a mortgage.
"However, like all sweet treats, it should come with a health warning. Borrowing beyond your means is a short cut to financial difficulty and while many will be tempted to do so given the lower initial cost of buying, it’s important to remember that a property purchase is an expensive, long-term commitment.
"Particularly if you find yourself on a variable rate mortgage, it can be a slippery slope where monthly repayments are concerned as soon as interest rates start to creep up again.”
