Mortgage guarantee scheme

The Mortgage Guarantee scheme was extremely useful when it launched and it facilitated the return of appetite for 95% mortgage lending.

However, after six months many lenders were then offering low deposit mortgages without using the scheme and it quickly became obsolete and unnecessary.

Now its removal will have zero impact on mortgage availability and pricing, but we thank it for reopening doors on its launch.

The take-up of the scheme within mortgage lenders has dwindled over time, with many lenders offering mortgages of 95% (or more) without the government scheme behind it, Halifax the most recent continuing their 95% range without it. With lenders improving affordability and allowing people to borrow more, that confidence backs this withdrawal decision, and shouldn't impact smaller deposit borrowing. It's a tool for the future should the dynamics of the mortgage market change for the worse.

The end of the Mortgage Guarantee Scheme will have next to no impact on first-time buyers applying for mortgages. Yes, it's one less scheme available to them, but with many lenders offering 95% mortgages, and some even offering ones with no deposit now, borrowers with a low deposit still have plenty of options. That said, the government should look at introducing a new scheme to help first-time buyers. A new, well-thought-out scheme would benefit the market if implemented correctly. But, I doubt that many people will mourn the loss of this scheme.

Some lenders will just alter their offering to still offer 95% mortgages in another guise as Halifax have announced today. I don't think there will be any shift as there are plenty of options available to all borrowers.

I'm not sure what impact the sheme had beyond the first 12 months of its launch. It was a good intervention at the time but once the dust setteled and lenders adapted the low-deposit schemes quickly replaced these and the schemes impact has been minimal at best in recent months. The end of the scheme is unliley to have a major impact on the avaialbility of 95% mortgages.

Much like a raindrop in a tsunami the end of the Mortgage Guarantee Scheme's expiry will barely be felt, unless mortgage funding pressures increase or swap rates stay elevated. If this happens a pullback of other 95% (and even 100%) mortgage solutions available on the market could ocurr, although this currently seems unlikely.