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Mortgage Guarantee Scheme extended - but is it too little too late?

Journalist: Rachel Mortimer, The Times

ended 20. December 2022

The  Government has extended its Mortgage Guarantee Scheme by a year to December 2023 to help boost the number of deals for first-time buyers. 

But is it too little too late after mortgage rates surged following the chaotic mini-Budget and are yet to return to normal? Are first-time buyers still priced out by high mortgage rates and stretched affordability, regardless of how many deals are available on the market?

Thank you! 

 

5 responses from the Newspage community

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Justin MoyVerified
Managing Director at EHF Mortgages
The Mortgage Guarantee Scheme extension will be a huge sigh of relief for both lenders and borrowers in this difficult period in the market. It will ensure that those with smaller deposits can still look to purchase their first homes, although lenders will probably offer them on 3 or 5 year fixed rates to ensure equity exists on renewal. Rates for higher Loan to Value (LTV) mortgages will continue to be priced at a premium compared to other deposit sizes, and lenders will need to offer something to keep this market interested, or the property ladder won't function.
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Mike StatonVerified
Director at Staton Mortgages
Whilst the mortgage guarantee scheme is a great bit of security for lenders to encourage lending, it does little to help affordability for first time buyers. Mortgages are available at 95% LTV, but if a first time buyer who earns 20k a year can only borrow 4 times their own income, the problem lies with the properties they can purchase. An incentive to relax lenders affordability rules would be much more welcome
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Benjamin BlythVerified
Director at Houz Mortgages
An extension to the Mortgage Guarantee Scheme is welcome, as it will keep options available for first-time buyers through the ongoing market turbulence. These buyers are some of the most active and most motivated at present as they still want to move out from their parents' homes, rented or shared accommodation. Bearing in mind it takes an average of eight years to save for a house deposit, they won't want to fall at the final hurdle. Fixed rates continue to fall, and some lenders have recently been improving affordability. House prices cooling and higher stamp duty threshold savings are offsetting some increased costs and so most first-time buyers are not finding themselves priced out but taking a deep breath, being very realistic about higher monthly costs, making cheekier offers and getting on with achieving their goal.
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Jamie LennoxVerified
Director at Dimora Mortgages
With the uncertainty around house prices heading into 2023, it's reassuring that the government has come out to back the scheme to insure that lenders still support first-time buyers with a smaller deposit. The real issue, though, is the continued lack of an adequate scheme to replace Help to Buy in the way it helped so many buyers get onto the ladder. Sky-high house prices and rates will continue to be a sticking point for many first-time homeowners who just can't afford to buy in this current climate.
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Lea KarasavvasVerified
Managing Director at Prolific Mortgage Finance
With most predictions suggesting anything between a 5%-15% reduction in property prices, the extension of the Mortgage Guarantee Scheme should be an opportunity for first-time buyers. The reduction in property prices will be due to a lack of investors and many accidental landlords disposing of parts of their portfolio, which is a huge opportunity for first-time buyers. Less competition will create less demand and should open the door of opportunity to those that were being priced out by aggressive landlords. With more choice and less competition, those that can meet the affordability requirements of lenders, which has stayed surprisingly strong despite the increasing cost of living, will be rewarded with greater opportunity as the market for 2023 will favour buyers rather than sellers with supply outweighing demand.