The Extended Mortgage Guarantee Scheme

The Extended Mortgage Guarantee Scheme

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    Navigating the ever-evolving landscape of property acquisition is a complex task, and staying informed about government-backed initiatives is crucial. In this blog, we unravel the intricacies of the extended Mortgage Guarantee Scheme, offering insights into its purpose, eligibility, and whether it’s your best route to securing a mortgage.

    Understanding the Mortgage Guarantee Scheme

    Introduced in April 2021, the Mortgage Guarantee Scheme aimed to facilitate homeownership by enabling buyers with a 5% deposit to purchase properties valued up to £600,000. The scheme, backed by the government, sought to revitalize the housing market post-pandemic by encouraging lenders to provide 5% deposit mortgages. Lenders participating in the scheme pay a fee for the government guarantee, mitigating potential losses in case of property repossession.

    Extension of the Scheme

    Originally scheduled to conclude in December 2022, the Mortgage Guarantee Scheme has undergone extensions. Initially prolonged until December 2023, the Chancellor further extended its duration in the 2023 Autumn Statement, pushing the scheme’s end date to June 2025.

    How to Engage with the Mortgage Guarantee Scheme

    Unlike traditional application processes, the Mortgage Guarantee Scheme does not entail a direct application by prospective homebuyers. Instead, it aims to incentivize lenders to offer 95% Loan-to-Value (LTV) deals. Although some lenders, like NatWest, have shifted away from the scheme, others, including Barclays, continue to provide details on eligibility criteria for 95% mortgages through the scheme.

    Eligibility Criteria and Lender Variances

    While the government sets a broad eligibility criterion for the scheme (applicable to houses under £600,000), individual lenders may impose additional criteria. For instance, Barclays restricts the use of the scheme for newly built properties and outlines borrowing limits for houses and flats. Buyers need to explore lender-specific conditions when considering the scheme.

    Mortgage Lenders Offering 95% Mortgages

    Leading financial institutions like Barclays, NatWest, and Lloyds Bank continue to offer mortgages for those with a 5% deposit. However, it’s crucial to note that interest rates may be higher compared to larger deposit options. For a detailed overview of the best first-time buyer mortgage rates, our regularly updated guide provides insights into rates for various deposit percentages.

    Considerations Beyond the Mortgage Guarantee Scheme

    While the scheme successfully increased the availability of 95% of mortgages, borrowers should prioritise individual mortgage terms, interest rates, and fees when selecting a deal. Exploring a 10% deposit may lead to more favourable terms and a broader range of mortgage products.

    Exploring Alternatives and Future Schemes

    Beyond the Mortgage Guarantee Scheme, the government offers various schemes, such as Shared Ownership, to assist homebuyers. Stay informed about evolving initiatives, including Skipton’s 100% mortgage for renters with a proven track record and ongoing updates to the affordable housing program.

    Preparing for Buying a Home

    For those not yet ready to buy, strategic steps include calculating an affordable budget, improving credit ratings, and exploring savings options like the Lifetime ISA for individuals under 40.

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    As the Mortgage Guarantee Scheme continues to shape the landscape of property acquisition, understanding its nuances is crucial. Our blog serves as a comprehensive guide, providing valuable insights into eligibility, lender considerations, and alternative pathways to homeownership. Stay informed to make empowered decisions on your journey to owning a home.

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