The April budget speech gave first-time home buyers more than a glimmer of hope, with the introduction of a Mortgage Guarantee Scheme. This government measure aims to inject life into the lackluster UK private property market, and helps buyers of homes purchase the properties they would otherwise not be able to secure. This article takes a look at what the Mortgage Guarantee Scheme means for aspiring property owners, when property buyers can take advantage of this scheme, and what Rishi Sunak, Chancellor of the Exchequer, had to say about this UK property market stimulant.
The scheme in a nutshell
This scheme was engineered to assist prospective property purchasers with only small deposits available, which often renders them unable to secure sufficient financing. Across the UK, prospective home buyers can secure properties of up to £600,000, and the scheme applies to both existing properties and new-build properties. The last government initiative of this nature and magnitude was the Help to Buy: Mortgage Guarantee Scheme, which closed to applications near-on five years ago.
What about lenders?
Lenders will have the option to buy a guarantee on the amount above 80% of the mortgage, and they will take a 5% share of net losses above the 80% cap. With this in place, government hopes to curb the origination of poor quality loans. Mortgage guarantees will be valid for seven years post-originated mortgage, with lenders having to pay a commercial fee to government for each mortgage. Property buyers can enquire about the new Mortgage Guarantee Scheme from lenders across the UK, including HSBC, NatWest, Barclays, Santander, Lloyds, and Virgin Money.
When is it applicable?
Buyers have had the chance to apply for mortgages under the new scheme since 19 April 2021. Initially, the Mortgage Guarantee Scheme will only run until 31 December 2022. However, hopeful news for home buyers came from the UK government, when they confirmed that the scheme’s end date will be revised and possibly extended into 2023.
What the chancellor had to say:
Chancellor of the Exchequer, Rishi Sunak, cited job creation and removing barriers to entry as important driving forces of the new property market scheme.
‘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.’
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