In the recent budget announcement, the Government announced the launch of their new Mortgage Guarantee Scheme. Although it’s predominantly aimed at first-time buyers, unlike the Help to Buy scheme, this is also open to existing homeowners who would otherwise struggle to find a large deposit, so this is really great news. The Government wants to support a new generation onto the housing ladder and achieve their dream of owning a home.
What is the Mortgage Guarantee Scheme?
Under this scheme, lenders will be offering 95% loan-to-value (LTV) mortgage products, reducing the need for large deposits. 95% mortgages had all but disappeared through the pandemic because of increasing economic uncertainty. This cautious approach to lending would have impacted thousands of first-time buyers and homeowners who didn’t have access to a large deposit. To provide security for these lower deposit mortgages, lenders will benefit from the option to purchase Government guarantees to protect them against any future foreclosure losses. This new scheme is a really positive move by the Government as it means more households will be able to access mortgages without the need for large deposits.
Which lenders are part of the Mortgage Guarantee Scheme?
Many of the largest lenders around including Lloyds, NatWest, Santander and Barclays will be offering the mortgages from next month. First-time buyers and homeowners will be able to take advantage of this scheme right up until 31st December 2022.
Is the property I want to buy eligible for the Mortgage Guarantee Scheme?
Although this scheme is open to both first-time buyers and existing homeowners, there are some eligibility rules that apply for this Government backed scheme.
The mortgage must be:
- for a residential home (not second homes) and not a buy-to-let property
- taken out by an individual or individuals rather than an incorporated company
- on a property in the UK with a purchase value of £600,000 or less
- of between 91 percent and 95 percent loan-to-value
- originated between the dates specified by the scheme
- a repayment mortgage and not interest-only
- able to meet standard requirements in terms of the assessment of the borrower’s ability to pay the mortgage, for example a loan-to-income and credit score test
Long term fixed rate mortgages
The Mortgage Guarantee Scheme will help to make sure that there are options on the mortgage market for people with smaller deposits. It’s also fair to assume that people taking advantage of this scheme will want the security of predictable repayments over a longer period. It’s for this reason that a requirement will be in place that any lender participating in the scheme must offer a five year fixed rate as part of the range of deals offered under the Mortgage Guarantee Scheme.
All in all, this is a really positive move by the Government that both supports the economy and improves the opportunity for people with lower deposits to still purchase their dream home. If you’d like to read more about the scheme, you can head over to the Government website.
If you’d like to find out about the options open to you for securing your dream home, our friendly team at Robin Mortgage Design would be happy to help. Just give us a call on 0333 242 3863, alternatively, you can fill out our online enquiry form, and we’ll be in touch.
Good Luck with your mortgage!
Written by Mark Travell,
Director of Robin Mortgage Design
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