Mortgage guarantee scheme extended further - Autumn Statement 2023

It is good news that the mortgage guarantee scheme has been extended as this will give lenders the incentive to offer mortgages to people with small deposits. However, this is just a small sector of buyers so it will do little to boost a flagging housing market. Not doing a stamp duty holiday seems like a glaring error. To be honest the chancellor can do all the fancy tax cuts he wants but none of this will be of any comfort to anyone who has recently taken out a mortgage at a 5%+ interest rate which adds hundreds of pounds a month onto most people's payments.

The extension to the Mortgage Guarantee Scheme is simply more tinkering to help house builders flog property to first-time buyers at overinflated prices. It's a guarantee to lenders to offset any potential losses from lending at high LTVs. It will do nothing to address the huge challenges the UK faces to increase both the quality and quantity of housing stock. Fixing our arcane planning laws to free up land use for social house-building would be far more beneficial in the long run.

The Mortgage Guarantee Scheme hasn't really had that much of an effect to date on the UK property market, but this could be related to it being run alongside the now-extinct Help to Buy scheme. Lenders have also been brave and bitten the bullet on raising their Loan to Values on their mortgage products without utilising this scheme. Once the market picks up, in the New Year, it would be interesting to see what effect the extension of this scheme has.

This will have a similar effect to a single passenger on the Titanic trying to clear their cabin with an egg cup. There are many lenders lending to people with just 5% deposits without using the scheme, so it’s not really necessary. Skipton Building Society are even lending with 0% deposit with no Government backed guarantee. It just means that The Government (well tax payers actually) carry the risk, but don’t get to see any of the reward from mortgage lending.

Speaking to many brokers and lenders, I am not sure whether this will make a difference, certainly not the difference the treasury is hoping it will, the majority of lenders now offer 95% mortgages and therefore have not seen the expected usage of the Mortgage Guarantee Scheme.
It was brought out due to lenders only recently going back to lending 90% mortgages, the government offering this provided security to the lenders that should borrowers on 95% mortgages struggled paying the government would step in, however, a few years on it seems very underused.
Hope we are wrong

The extension of the mortgage guarantee scheme was expected, but nevertheless welcome. Yes, many Lenders are currently happy to lend at high loan to value it has not always been so in the past as many people will remember. It's very important that 1st time buyers are given a chance to get on the ladder, so it's good that Lenders have access to this safety net should they need it.