Mortgage Guarantee Scheme

One of the measures announced at the Budget was the introduction of a new Mortgage Guarantee Scheme to help home buyers purchase property. The scheme was officially made available from Monday, 19 April 2021. The new scheme is designed for prospective home buyers. Who only have a small deposit and are therefore unable to obtain mortgage finance. Under the scheme, lenders will able to offer new 95% mortgage products.

What is mortgage guarantee scheme? 

The scheme is open to first time buyers deposits 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 has confirmed that the end date for the scheme will review and may extend.

Can I take advantage of the mortgage guarantee scheme? 

The scheme will initially run until 31 December 2022. The government will provide 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 will help to ensure that lenders. There are not incentivise to originate poor quality loans. Lenders will also need to pay the government a commercial fee for each mortgage in the scheme. Government scheme mortgages will valid for up to seven years after the mortgage is originate.

There will a cap on the size of the government’s contingent liability under the scheme of £3.9 billion. Although this is not expect to impinge on delivery of the scheme. The scheme is similar to a previous Help to Buy: Government mortgage Guarantee Scheme. This is close to new applicants on 31 December 2016.

Which lenders offer mortgages under the scheme?

The scheme is available from lenders on high streets across the country, with Lloyds, Santander, Barclays, HSBC and NatWest already launching mortgages under the scheme and Virgin Money following next month.

Commenting on the launch of the scheme, the Chancellor of the Exchequer, Rishi Sunak said:

‘Every new homeowner and home mover supports jobs right across the housing sector but saving for a big enough deposit can be hard, especially for first time buyers.

By giving lenders the option of a government guarantee on 95% mortgages, many more products will become available, boosting the sector, creating new jobs and helping people achieve their dream of owning their own home.’