Mortgage Guarantee Scheme extended
The Mortgage Guarantee Scheme was set to end on 31 December 2022. In a last-minute announcement from HM Treasury, it was confirmed that the scheme will now be extended for a further 12 months until 31 December 2023.
The scheme helps prospective home buyers (mainly first-time buyers) who only have a small deposit and may find getting a traditional mortgage difficult. Under the scheme, lenders can offer 95% mortgage products.
The scheme has assisted over 24,000 households since it was launched in April 2021.
The scheme is open to first time buyers and home movers across the UK. Home buyers can purchase properties valued at up to £600,000 and both new-build and existing properties are eligible.
The government provides lenders with the option to purchase a guarantee on the top-slice of the mortgage (over 80%). Lenders will also take a 5% share of net losses above this 80% threshold. This helps to ensure that lenders are not motivated to provide poor quality loans. Lenders also need to pay the government a commercial fee for each mortgage in the scheme. The mortgage guarantee is valid for up to seven years after the mortgage is taken out.