The government has announced the extension of the Mortgage Guarantee Scheme as part of the Autumn Statement 2023. This scheme, which was due to expire at the end of 2023, will now continue until June 2025.
This extension cements the government’s strategy to support first-time buyers and stabilise the housing market in the wake of economic challenges and pandemic-induced disruptions.
Launched in April 2021, the Mortgage Guarantee Scheme was introduced as a response to the shortage of high loan-to-value (LTV) mortgage options during the COVID-19 pandemic. The primary objective of the scheme is to assist buyers, especially first-timers, who can only afford smaller deposits (5% to 9%), to purchase homes. It operates by offering lenders the opportunity to purchase a government guarantee on these mortgages, compensating for a portion of net losses in cases of property repossession. This scheme has been pivotal in helping over 24,000 households step onto the property ladder, with first-time buyers making up 85% of the scheme’s transactions. 
The extension, announced in the November 2023 Autumn Statement, prolongs the scheme’s duration by 18 months, extending its expiration to June 2025. This decision aims to continue to assist prospective borrowers, particularly those struggling with the increasing challenge of gathering substantial deposits for home purchases. The scheme applies to properties worth up to £600,000 and covers 95% of net losses, with lenders retaining a 5% risk in the portion of losses covered by the guarantee.
The Mortgage Guarantee Scheme has been a cornerstone in the UK’s approach to mitigating the housing crisis, especially in the context of the economic challenges posed by the pandemic. It has played a crucial role in restoring confidence and competition in the high LTV mortgage market, which saw a dramatic reduction in product availability during the pandemic. Moreover, by facilitating homeownership for those with limited savings, the scheme contributes significantly to the overall health and accessibility of the housing market.
The extension of the Mortgage Guarantee Scheme has been met with mixed reactions. While it is acknowledged as a positive step for those with smaller deposits, there are concerns about its overall impact and reach. Some experts have pointed out that the scheme’s income multiplier cap limits borrowing potential, potentially leaving many homes unaffordable. Additionally, the risk of negative equity, especially for buyers at peak market prices, is a significant concern. These challenges underscore the necessity for a broader, more holistic approach to address the barriers facing first-time homebuyers, including a thorough review of the market and the development of more inclusive financial products.
The extension of the Mortgage Guarantee Scheme is a testament to the government’s commitment to facilitating homeownership in the UK. While it offers essential support for first-time buyers, it also highlights the need for ongoing evaluation and adaptation of housing policies to ensure they align with the changing economic landscape and the diverse needs of potential homeowners. As the scheme continues, its effectiveness in addressing the broader challenges of the UK housing market will be a critical area of focus for policymakers, industry experts, and potential homebuyers alike.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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 Rightmove – Autumn Statement: mortgage guarantee scheme extended by 18 months