As part of the hotly anticipated Autumn Statement today, The Chancellor revealed that the Mortgage Guarantee Scheme will be extended for an additional 18 months.
While the scheme was due to finish on the 31st December 2023, the Government will now extend the scheme until June 2025 in the hopes of helping prospective borrowers with their goals of homeownership.
Despite little mention of other pressing topics related to the mortgage and property industry – such as Stamp Duty, Inheritance Tax (IHT) and support for landlords – the extension of this scheme has been well received by the majority of industry experts.
Amanda Aumonier, director of mortgage operations at Better.co.uk, said: “The Mortgage Guarantee Scheme has been a vital support for first-time buyers facing soaring house prices, enabling them to afford a home with just a 5% deposit.
“The scheme’s positive impact on the property market cannot be overstated – by lowering the barrier to entry, it’s empowered countless individuals to step onto the property ladder.”
She continued: “This extension will provide much-needed continuity in supporting those navigating the challenging prospect of affording a home.
“While the scheme’s success is evident, the Government must address the broader challenges that persist in the housing market. Affordability remains a persistent issue, especially in certain regions.
“To address this, the government should explore comprehensive strategies to enhance housing supply and affordability.
“Extending the Mortgage Guarantee Scheme is a commendable step, but it must be part of a broader commitment to tackle the root causes of the housing crisis by addressing regional disparities and ensuring that the dream of homeownership is within reach for all aspiring buyers.”
Reece Beddall, sales & marketing director, Bluestone Mortgages, added: “The Chancellor’s commitment to investing in the housing market is welcome news for all.
“With affordability concerns still a key issue, the extension of the Mortgage Guarantee Scheme and the Affordable Homes Guarantee Scheme will provide much-needed support for those prospective borrowers with smaller deposits and ultimately provide them with a helping hand to make their homeownership dreams a reality.”
However, according to Karen Noye, mortgage expert at Quilter, the extension of the scheme may not be as helpful as it may appear.
She said: “The extension of the Mortgage Guarantee Scheme until June 2025 is really the least the Government can do for first-time buyers.
“The scheme has so far not been particularly impactful and will likely continue not to be. Generally, first time buyers will find themselves limited to a maximum of 4.5 times their annual income.
“For those on the average salary this means they can only borrow just over £150,000 giving the buyer not much choice in the market.
“Saving for a bigger deposit or raiding the Bank of Mum and Dad can therefore offer more choice. This extension makes little difference today and had Hunt instead opted to simply get rid of it, it likewise wouldn’t have had much impact.”
Noye continued: “With such a high loan-to-value (LTV) there is also the risk of negative equity, which is a significant concern in this property market, especially for those who purchase properties at peak prices.
“If the housing market experiences a downturn, individuals who utilised the scheme may find themselves in a challenging financial position, struggling with negative equity and limited mobility. This situation could be further exacerbated if they need to sell their homes, as they would have to cover the negative equity, moving costs, and a new deposit.
“Therefore, while the scheme’s intentions are positive, it’s crucial to implement measures that ensure long-term stability for new homeowners and the housing market. This might include more stringent eligibility criteria or additional support mechanisms to safeguard against market fluctuations.”
