The Government has confirmed the extension of the Mortgage Guarantee Scheme until the end of 2023.
The scheme sees the Government offer lenders financial guarantees to provide 95% loan-to-value (LTV) mortgages on properties worth up to £600,000.
It was launched in April 2021 and had been due to end later this month. To date more than 24,000 households have used the scheme.
Chief Secretary to the Treasury John Glen said: “For hard-working families facing today’s challenging economic conditions, it is 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.”
Reaction
Steven Poole, mortgage expert at Dashly.com:
“It’s great that more 95% deals will be in the market because of this.
“But that awkward moment where the interest rate percentage is higher than the required deposit percentage can’t be ignored.”
Gary Boakes, director at Verve Financial:
“Any support for first-time buyers is a good thing at the moment.
“With several lenders recently pulling 2-year fixed rate products at 95% and affordability and criteria being restricted, the higher LTV market was starting to look restricted.
“Hopefully, this will improve confidence among lenders.
Justin Moy, managing director at EHF Mortgages:
“The decision to extend the scheme is a no-brainer, but very welcomed within our industry. This will enable lenders to continue to offer mortgages to those with smaller deposits, with the additional risk covered by the government rather than the lender itself.
“To cover the predicted bump in property values and the subdued market, it would be prudent for lenders to offer these 95% mortgages on longer fixed terms, say 3-5 years, as that will hopefully cover any negative equity issues, so when the mortgage is ready for renewal, there is equity in the property. This will also help with checking a borrower’s affordability.
“Even with a 95% mortgage commitment, this will be a cheaper option than renting in many parts of the UK.”
Amit Patel, adviser at Trinity Finance:
“This is a much-needed policy announcement that will enable buyers with a smaller deposit to get onto the housing ladder in the turbulent times we are going through.
“It would have been naive to withdraw the scheme given the dip in housing activity and the prevailing sentiment that house prices will drop in 2023/2024.
Graham Cox, director at Self Employed Mortgage Hub
“Extending the Mortgage Guarantee Scheme will just encourage first-time buyers to get a 95% mortgage into a falling market.
“House prices could easily drop 20% over the next year to 18 months, so all this will do is increase borrower’s chances of getting into negative equity and potentially being repossessed.
“The best thing the Government can do for first-time buyers and support the economy is let house prices fall so they become more affordable. This will have the opposite effect.”
Gaurav Shukla, director at home me:
“Although this may be perceived as a good thing, the Government just aren’t doing enough to help first-time buyers.
“The lending limits remain in place from the lenders so many people are still struggling to buy with a 5% deposit, especially when most lenders cap lending to 4.5x income at this loan to value.
“The Government’s Help to Buy scheme has ended and this was a real boost in many people their first homes, and something very similar to this will need to be thought of, quickly.
“There are new private lenders that are replacing the Help to Buy scheme, where I have seen many people who cannot purchase with a 5% deposit only, can finally get on to the property ladder.”
Scott Taylor-Barr, financial adviser at Carl Summers Financial Services:
“Any support for first-time buyers is a good thing: even a 5% deposit in today’s housing market represents a huge chunk of money.”
