Mortgage Guarantee Extension in package of first time buyer help

A range informal media briefings on behalf of the UK government suggest that an extension of the current mortgage guarantee scheme is one of a number of measures being considered to help first-time buyers.

Speculation, started in the Times, suggests the Treasury is looking at making the scheme - which helps people take out a mortgage with a five per cent deposit - available for 2024.

The scheme, first introduced in March 2021 by then-Chancellor Rishi Sunak, signed up lenders to give mortgages to borrowers with a smaller deposit. 

In the past two years, Bank of England base rate has risen from under 0.5 per cent to today’s 5.25 per cent, escalating mortgage costs for FTBs and other would-be house purchasers. Independent mortgage market monitor Moneyfacts says the typical rate for a five-year fixed mortgage has dipped to 5.99 per cent but a two-year fixed mortgage has a rate of 6.5 per cent.

The mortgage guarantee scheme was extended for 12 months last year and is due to end in December.

Other measures on the table to help FTBs reportedly include a new ISA Individual Savings Accounts to encourage potential buyers to save for a home; the existing Help To Buy ISA has been criticised for failing to rise in line with house prices. Under its rules, buyers received a 25 per cent bonus from the government on homes worth up to £250,000 in England (excluding London) and £450,000 in London.

The government is also thought to be considering increasing the £450,00 upper limit on house purchases funded by a Lifetime ISA, where 25 per cent is added to savings aimed at building a deposit.

The new measures, if they come about, will be unveiled at the Autumn Statement on November 22.

Ben Thompson, deputy chief executive at Mortgage Advice Bureau, backs the mortgage guarantee extension and says: “It’s been a really challenging time for first time buyers to get the keys in their hands. Economic volatility has seen potential buyers battle high inflation, pushing prices up and limiting the amount they can save. 

“Meanwhile, the higher interest rate environment has lowered the amount they can borrow, meaning bigger deposits are needed. The government is right to look at support for those taking their first steps on the property market in the upcoming Autumn Statement, but extending the mortgage guarantee scheme is just one possible route. Other options on the table are a review of ISA products to support saving, or reforms to the existing products that savers are utilising. 

“For those looking at getting on the property ladder, it’s best to engage with a mortgage adviser as early as possible to get expert guidance on your potential options when it comes to getting a mortgage.”