Autumn Statement: mortgage guarantee scheme extended by 18 months

The government has announced an extension to its mortgage guarantee scheme, which aims to help more buyers get on the property ladder.

The scheme was first introduced in March 2021 and was due to end in December this year, but the full Autumn Statement report confirms it will be extended by 18 months, until the end of June 2025.

The scheme aims to help borrowers with smaller deposits to take out a mortgage with a 5% deposit on a home worth up to £600,000. The government gives a partial guarantee to the mortgage lender of up to 15 per cent if the borrower defaults on their repayments, which gives lenders the confidence to reintroduce these higher loan-to-value mortgages.

The mortgage guarantee scheme is available to those buying a primary residence (a home to live in) with a repayment mortgage and does not apply for buy-to-let investments, or to those purchasing a holiday home or a second home.

Our property expert Tim Bannister says: "Any support for those with the smallest deposits is always welcome, however in reality the scheme is only able to help a very small portion of movers. The proportion of mortgages that are taken out at the highest Loan-to-Value bracket is very small, with the majority of first-time buyers preferring to get the affordability benefits of saving for a bigger deposit.

"This in effect makes the scheme very limited, and movers, particularly first-time buyers, will have been hoping for more today."

Mortgage rates have continued to edge down since July this year, and after another Base Rate hold from the Bank of England in November, mortgage rates are expected to continue their downwards trend.

Our mortgage expert Matt Smith says many lenders are in fact now offering 5% deposit deals outside of the government scheme.

He says: "Rate cuts have continued to gather pace this week, and we've seen falls across all loan-to-value ranges. Lenders appear keen to attract movers with smaller deposits, with the biggest weekly reduction of 0.17% being seen in the 95% loan-to-value bracket.

"In recent weeks, we'd seen the cheapest rates dip below 5% for movers with larger deposits, and the eagerly-awaited sub-5% rate has now arrived for the 90% LTV bracket: typically where many first-time buyers will find themselves."

You can keep an eye on the current UK mortgage rates for different deposit sizes here, and check how they compare to last week.

If you're thinking of moving, a mortgage broker or adviser can talk through your specific circumstances to help determine the best lender for you, as well as explaining the type of mortgage that could be the best fit.

You can also apply for a Mortgage in Principle online, to give you an idea of how much you could borrow. It's quick and free, and your credit score won't be affected by your application.

The header image of this article is provided courtesy of Perry Bishop, Cirencester