The mortgage guarantee scheme which helps buyers with a small deposit purchase a property is being extended permanently, the government revealed yesterday.
Launched in 2021 the initiative is run through mortgage lenders, encouraging them to provide 95% loan-to-value mortgages. The government provides a guarantee for the portion of the loan between 85% and 95%, making it less risky for the lender.
It means those with a 5% deposit have more chance of finding a mortgage to get on or go up the property ladder.
Although the scheme was due to finish at the end of June, it was confirmed in Chancellor Rachel Reeves’ Spending Review yesterday it would be launched permanently in July. This was to ‘ensure the consistent availability of mortgages for buyers with small deposits’.
The scheme had supported the completion of 53,000 mortgages since its introduction, according to HM Treasury statistics published in May. Of these, 86% of these mortgages were issued to first-time buyers.
However, the scheme is not without its critics with some saying it does not go far enough to tackle the problems of affordability and a lack of housing stock, which are the main challenges for the housing market.
Others say, with many lenders already offering 95% mortgages, and some now providing 100% deals, the scheme is largely redundant.
Sarah Thompson, managing director, Mortgage Scout part of LRG, explained buyers will have to wait until July to understand what changes will be made to the current scheme.
She had some suggestions: “With high rents and rising living costs making it harder to save, this kind of support is critical for those trying to move from renting to owning.
“However, the current scheme excludes new-build homes, which is a key issue for many first-time buyers. If the government wants to improve access, it should look at widening the scope of the scheme and making it more inclusive.
“Although mortgage rates are now starting to fall, the size of the deposit remains the biggest challenge for most buyers.
“A permanent guarantee scheme could bring much-needed consistency to the market and give both lenders and borrowers greater confidence. We will be watching closely for the details in July, but the signal from the government is clear: helping buyers with smaller deposits is back on the agenda.”
