Mortgage guarantee scheme extended to the end of next year

This week the government announced that it would extend the mortgage guarantee scheme, that encourages lenders to offer 95% loan-to-value mortgages for first-time buyers, which means buyers with a 5% deposit can purchase properties with a value of up to £600,000.

The scheme follows on from the success of the 2013 Help to Buy: Mortgage Guarantee Scheme, which offered the low deposit mortgages after the financial crisis and meant those who could afford mortgage repayments but not the larger deposits had the chance to buy a new or bigger home.

The mortgage guarantee scheme started in April 2021 during the pandemic and had been due to stop at the end of this year – but will now continue until the end of 2023. Since the start of the programme, more than 24,000 households have obtained mortgages.

Under this programme, the government receives a fee from lenders in exchange for covering almost all the risk of a 95% loan-to-value mortgage, and the fee is intended to cover expected losses and administration costs. The borrowers who take out any mortgage product under the scheme will remain responsible for repayments in the same way as a normal mortgage.

The scheme will continue to support responsible lending, meaning borrowers must still pass the usual affordability tests set out by lenders, the FCA and the Financial Policy Committee (FPC) in order to access a mortgage under the guarantee. This is great news for the housing market, first time buyers, and those looking to add to their property portfolio. If you are interested in a new home in Ipswich, Derby or Birmingham, you can see all of our developments here.