New mortgage guarantee scheme set to be announced in Budget

A mortgage guarantee scheme to help prospective homeowners with smaller deposits onto the property ladder is set to be announced in the Budget on Wednesday 3 March. The government will offer incentives to lenders in order to bring back 95% LTV mortgages which were removed from the market as a result of the pandemic. According to The BBC, the scheme will involve the government offering to take on some of the risk that comes with low-deposit mortgages in order to bring them back onto the market. The new scheme will reportedly not be limited to first-time buyers but there will be a maximum property limit of £600,000, and will be offered from April. No end date for the scheme as been confirmed. The scheme is based on the Help to Buy mortgage guarantee scheme which ran until December 2016. Mark Harris, chief executive of SPF Private Clients, reacted to the news: "Turning ‘Generation Rent’ into ‘Generation Buy’ has been a focus for Boris Johnson for a while so the return of 95% LTV mortgages for first-time buyers doesn't come as a complete surprise. "This, coupled with the extension of the stamp duty holiday, will result in a Budget which is a real boost for buyers. "It is positive news for first-time buyers, particularly as it is not restricted to new homes, although critics may argue that it will only aid house price inflation. "But without such a scheme would developers be so keen to put spades in the ground? "The supply of new housing is nowhere near where it needs to be to satisfy demand. "For those with little in the way of deposit, finding a 95% LTV mortgage has been pretty much impossible in recent months. "The odd building society here and there has offered them, with Saffron building society launching at 95% LTV in June but it only lasted a matter of days. "Furness BS also has a selection of 95% products but these are restricted to certain postcodes. ’The only other current option to obtain a mortgage at this level is to call upon a third party, typically a parent, to provide extra security in the way of deposits or equity within the ‘guarantor’ property. "Not everyone is in a fortunate position to do so. "The last time there was a mortgage guarantee treasury scheme was via Help to Buy. "The mortgage guarantee offering closed to new loans on 31 December 2016 (the equity loan continues, albeit in a revised form today) but by then, many of the high-street names had removed themselves from the scheme and ‘self-insuring’ their 95% offerings." Rightmove put together the latest figures on asking prices and how many properties could be eligible under the scheme.

Their data found that 86% of properties up for sale have an asking price of £600,000 or less, with the national average asking price for all properties standing at £318,580, a 3.0% increase from February 2020.

The national average asking price of a first-time buyer property is £200,692, which is 3.6% higher than February 2020.

Since the Help to Buy mortgage guarantee scheme was first launched in 2013, national asking prices have increased by 29% from £246,748 in October 2013 to £318,580 in February 2021.

Mark Hayward, chief policy adviser at Propertymark, added: “A government backed mortgage guarantee scheme will help first-time buyers get on the housing ladder at a time when for many owning a home seems an impossible dream. "Alongside the potential extension of the stamp duty holiday that we have been calling for, this new scheme will go some way in giving some hope to first-time buyers at a time when the size of deposits required means they fall at the first hurdle.”