Chancellor Jeremy Hunt has extended the mortgage guarantee scheme by a further 18 months to close at the end of June 2025 – leaving property professionals largely underwhelmed.
The government plan, which mainly helps first-time buyers with 5% deposits to buy a home, was due to come to a halt at the end of this year.
Under the scheme, the government offers lenders the financial guarantees they need to provide mortgages that cover the other 95%, subject to affordability checks, on a house worth up to £600,000.
Loans that qualify for the scheme are set at 4.5 times income of the borrower.
Hunt gave his Autumn Statement in the House of Commons today, but the announcement came in the Treasury’s accompanying briefing notes
The programme, launched in April 2021, has helped over 24,000 households get onto the property ladder, as of last December.
However, Nationwide Building Society director of mortgages and financial wellbeing Rachael Sinclair says: “We welcome all measures that can play a role in helping people buy their first property, including the mortgage guarantee scheme extension but we are disappointed that it continues to restrict qualifying loans to 4.5 times income as research shows that most homes remain unaffordable through the scheme.
“More needs to be done. That is why we continue to call on the government to commission an independent review into the first-time buyer market.
“This will provide much-needed clarity on issues that continue to hamper prospective homebuyers, such as the lack of new homes and the need for products that address the equally significant barriers of deposit and affordability.”
Quilter mortgage expert Karen Noye argues that the extension, or the abolition of the scheme, would make little practical difference to FTBs.
Noye says: “The extension of the mortgage guarantee scheme until June 2025 is really the least the government can do for FTBs.
“The scheme has so far not been particularly impactful and will likely continue not to be.
“Generally, FTBs 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.”
