The government has announced it is extending its Mortgage Guarantee Scheme by a year to the end of December 2023.

Launched in April 2021, the scheme has so far helped over 24,000 households.

Under the scheme, the government helps people with 5% deposits onto the property ladder while offering lenders the financial guarantees they need to provide mortgages that cover the other 95%, subject to the usual affordability checks, on a house worth up to £600,000.

The scheme was originally planned to close at the end of this year but will now be extended until the end of 2023, the Treasury has confirmed.

According to the Treasury, the Mortgage Guarantee Scheme has helped to “restore competition and consumer choice to the market”.

Chief Secretary to the Treasury, John Glen, said: “For hardworking families facing today’s challenging economic conditions, it’s right that we continue to help them secure their first home or move into their dream house.

“Extending this scheme means thousands more have the chance to benefit, and supports the market as we navigate through these difficult times.”

However, reaction from the mortgage industry has been more critical of the scheme’s extension, with director at Self Employed Mortgage Hub, Graham Cox, stating: “Extending the Mortgage Guarantee Scheme will just encourage first-time buyers to get a 95% mortgage into a falling market. House prices could easily drop 20% over the next year to 18 months, so all this will do is increase borrower’s chances of getting into negative equity and potentially being repossessed.

“The best thing the government can do for first-time buyers and support the economy is let house prices fall so they become more affordable. This will have the opposite effect.”

Mortgage expert at Dashly.com, Steven Poole, added: “It’s great that more 95% deals will be in the market because of this. But that awkward moment where the interest rate percentage is higher than the required deposit percentage can’t be ignored.”

Share Story: