Mortgage Guarantee Scheme – Update

It appears that the Government and Bank of England are hoping to boost the property market with new recommendations and mortgage guarantee schemes. This is a significant development, especially for first-time buyers and those looking to move up the property ladder.

The government has announced its new mortgage guarantee scheme, which was launched in July. This scheme is designed to enable first-time buyers and home movers to purchase a home with a deposit of just 5%. While the government has not yet set out its eligibility criteria, it is understood that lenders will be provided with a government-backed guarantee to insure against any losses. This guarantee is expected to give lenders the confidence to offer more high loan-to-value (LTV) mortgages, which have been in short supply since the financial crisis.

With the market seeming more buoyant at present, it is hoped that the mortgage guarantee scheme will allow more people to get onto the property ladder or upsize, despite not having saved a full 10% deposit. This is particularly important in the current economic climate, where saving for a large deposit can be challenging for many people. The scheme is expected to provide a much-needed boost to the housing market, making homeownership more accessible to a wider range of people.

Alongside this, the Bank of England has recommended a looser cap on lending, which would most certainly benefit first-time buyers. In its Financial Stability Report, the bank advised that lenders could have more flexibility in lending to those with a higher loan-to-income ratio. At the moment, it is rare for a mortgage to be issued that exceeds 4.5 times salary – currently, under 10% of mortgages are issued on this basis. The bank is happy for this to be increased to more than 15% of new mortgages at above 4.5 times salary. The bank feels these changes could allow for 36,000 new mortgages a year.

If you are considering a house move and/or are a first-time buyer, it might be prudent to consult a mortgage broker to find out how these schemes will affect you and how much you would be able to borrow. Mortgage brokers can provide valuable advice and help you navigate the complexities of the mortgage market. They can also help you find the best mortgage deals and ensure that you meet the eligibility criteria for the new schemes.

In addition to consulting a mortgage broker, it is also important to seek advice on the conveyancing process. Conveyancing is the legal process of transferring ownership of a property from one person to another, and it can be complex and time-consuming. If you would like some advice on the conveyancing process, why not give our property team a call? We will be happy to assist you and ensure that your property transaction goes smoothly.

In conclusion, the new mortgage guarantee scheme and the Bank of England’s recommendations on lending caps are positive developments for the UK housing market. They should make it easier for first-time buyers and home movers to obtain mortgages and get onto the property ladder. If you are considering buying a home, now might be a good time to take advantage of these new schemes and make your move.