23 Oct 2023

Could the Mortgage Guarantee Scheme Be Extended Again?



Are you a first-time buyer looking to enter the property market with a limited deposit? The mortgage guarantee scheme may be the solution you've been waiting for. In this blog post, we will delve into how this scheme works, the potential extension of the scheme, and other government initiatives aimed at assisting first-time buyers. By the end, you'll better understand the options available to you and how to confidently navigate the property market.

 What is the Mortgage Guarantee Scheme?

The mortgage guarantee scheme allows first-time buyers to take out a mortgage with only a 5% deposit. This government-backed initiative reassures lenders by promising to cover certain costs in the event of financial loss, such as property repossession. While it opens doors for aspiring homeowners, some critics argue that the rates associated with the scheme are higher compared to those for higher deposit home loans.

Extension of the Mortgage Guarantee Scheme

First-time buyers 

According to reports, there is a possibility that the mortgage guarantee scheme will be extended once again. Jeremy Hunt, the Chancellor, is expected to announce any updates during his Autumn Statement in November. This extension could provide continued support to first-time buyers who wish to benefit from the scheme's advantages if approved. However, it's worth noting that no official decision has been made at this time.

 Additional Help for First-Time Buyers

In addition to the potential extension of the mortgage guarantee scheme, the Treasury is exploring other avenues to assist first-time buyers. One proposal involves the creation of a new ISA product specifically designed for saving towards property purchases. Previously, individuals could claim a 25% government bonus through Lifetime and Help to Buy ISAs. Although new Help to Buy ISAs are no longer available, existing account holders can continue saving until November 2030. Additionally, the Chancellor is reportedly considering increasing the upper limit on eligible property values, aligning it with the surge in house prices.

How Does the Mortgage Guarantee Scheme Work?

Under the mortgage guarantee scheme, aspiring homeowners can access 95% loan-to-value (LTV) mortgages, requiring only a 5% deposit. The government then offers a guarantee to reduce the lender's risk, particularly in the case of repayment defaults and property repossessions where the sale price does not cover the outstanding mortgage amount. This guarantee covers the portion of the mortgage exceeding 80%, which, in the case of a 95% mortgage, amounts to the remaining 15%. However, it's important to note that 5% deposit deals often come with higher interest rates.

mortgage guarantee 

 Considerations for Buyers

While the mortgage guarantee scheme can be a valuable opportunity for first-time buyers, it's crucial to evaluate all options carefully. Experts suggest aiming for a 10% deposit if feasible, as this reduces the loan-to-value (LTV) ratio and subsequently lowers monthly repayments and fees. It's important to highlight that mortgage guarantee scheme deals are comparable to other 5% mortgage options. To make an informed decision, buyers should focus on finding the best terms available and not rely solely on the scheme.

Are you ready to leap into homeownership? The mortgage guarantee scheme offers an exciting opportunity for first-time buyers, allowing them to secure a mortgage with just a 5% deposit. While rumors of a potential extension circulate, it's essential to stay updated with government announcements. Explore other government initiatives such as ISA products specifically aimed at property purchases. Remember, informed decision-making is crucial when navigating the property market. Start your journey towards homeownership with confidence and explore the options available to you today.

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