The Mortgage Guarantee Scheme is aimed at helping more first-time buyers onto the property ladder by making it easier to obtain a mortgage with only a 5% deposit.
Under the initiative, launched in 2021, the government provides mortgage lenders with financial guarantees which enable them to provide mortgages to cover 95% of a property’s value.
It’s available for homes worth up to £600,000 although it’s not available on new-build homes.
The Treasury said the scheme, which was due to close at the end of 2022, had already helped over 24,000 households.
The extension will come as welcome news to many first-time buyers, particularly as it comes amid the demise of the Help to Buy scheme, which has already closed for new applications and will end in March 2023.
John Glen MP, chief secretary to the Treasury, said: “For hard-working families facing today’s challenging economic conditions, it’s right that we continue to help them secure their first home or move into their dream house.
“Extending this scheme means thousands more have the chance to benefit, and supports the market as we navigate through these difficult times.”
First-time buyer support
The Mortgage Guarantee Scheme is one of several initiatives to help first-time buyers purchase a home.
The Lifetime ISA, First Homes Scheme and Shared Ownership are also available – you can find out more about these here.
The government also increased the level where first-time buyers start paying stamp duty from £300,000 to £425,000. And they can also get tax relief on properties up to £625,000, until April 2025.
Charlotte Nixon, mortgage expert at Quilter said the Mortgage Guarantee Scheme extension came at a ‘trying time’ for first-time buyers.
“They face issues ranging from inflated house prices, inflation rapidly eating away at their deposits, and the rising cost of living disrupting their ability to save, all against a backdrop of successive interest rate hikes,” she said.
Until the mortgage turmoil in September, when lenders began pulling mortgage deals and inflating prices as a consequence of the mini-Budget, there had been lower take-up of the scheme as providers were offering their own 95% deals.
But, Nixon explained, these deals have now become rare. “The popularity of the scheme may therefore soar next year as potential buyers are pushed into the scheme due to a lack of choice elsewhere,” she said.
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