The Chancellor has confirmed more details for the government’s plans to launch a mortgage guarantee scheme.

At his Budget speech, Rishi Sunak announced that first-time buyers will get a “government guarantee” on mortgages with a deposit of 5%.

The scheme, expected to launch in April, will allow both existing homeowners and first-time buyers to purchase properties up to £600,000.

Many “big lenders”, including Lloyds, NatWest, Barclays, Santander and HSBC, are already backing the scheme, Sunak told the House of Commons.

O’Neill Patient CEO, Andy Scaife, commented: “We are very supportive of the government’s new mortgage guarantee scheme as it should help to further stimulate the housing market as the stamp duty holiday draws to a close. This will open up the market to home movers and, more significantly, first-time buyers who now have an option of only having to find a 5% deposit.
 
“The scheme’s appeal is likely to be wide ranging across different incomes as, with this scheme, a 95% mortgage is not just for people on lower salaries buying lower valued homes, it is also for those who have a higher income buying in more expensive areas.”

The Treasury has suggested the mortgage guarantee scheme is designed to “increase the appetite” of mortgage lenders for high LTV lending to creditworthy customers.

However, Labour leader, Kier Starmer, said the Chancellor should have announced a “generation of genuinely affordable council housing”, as he warned the government’s mortgage guarantee will drive up home prices for first-time buyers.

Commenting on Sunak’s announcement, CEO of specialist lender Vida, Anth Mooney, said the scheme will help more buyers onto the housing ladder but agreed with the Labour leader that the scheme will “add to the upward pressure” on house prices.

“The extension of the stamp duty holiday together with the new Help to Buy mortgage guarantee scheme, makes a fall in house prices in 2021 look increasingly unlikely,” Mooney said.

“The new mortgage guarantee scheme will help more buyers onto the housing ladder but will also add to the upward pressure on house prices.

“The new mortgage guarantee scheme is fantastic news for those who have struggled to get a foot on the housing ladder, and with low interest rates and a desire for more space driving an increase in activity, the scheme likely serve to inoculate house prices against the big falls that some were predicting for 2021.”

The Treasury has confirmed the scheme is intended to mirror the Help to Buy: Mortgage Guarantee scheme which the government launched in 2013. This scheme saw the number of products available at 95% LTV increase from 43 in October 2013, to 261 in June 2017.

PRIMIS Mortgage Network proposition director, Vikki Jefferies, added: “The new 95% mortgage guarantee scheme will be a lifeline for many aspiring homeowners, particularly those who have been held back during the crisis, and for the biggest lenders who have a desire to support this community but have been constrained during the last 12 months.

“I am confident that today’s news will be met with great enthusiasm from the lender and adviser community and I am hopeful that, in the months to come, the measures announced will enable a growing number of young borrowers to step onto property ladder and contribute to the ongoing growth of the mortgage market.”

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