The government has said it will introduce a permanent and comprehensive mortgage guarantee scheme to help young families and renters onto the property ladder.
Details of the scheme will be announced in due course. It will replace the existing mortgage guarantee scheme, which was introduced in 2021 to encourage lenders to lend at high loan to values (LTVs) following uncertainty during the pandemic when the market shut down.
The current guarantee sees the government share the risk of high-LTV loans with lenders by covering 90% of the purchase value of a property, while the lender takes on 5% of the risk.
The scheme was set to close this year.
At the Autumn Budget, Labour said it would make the scheme permanent, and this week said the new version of it would give banks and building societies “long-term confidence to continue offering low deposit mortgages”.
The scheme supported 45,775 loans from its launch up until June 2024, accounting for 1.4% of the residential mortgage market.
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Emma Reynolds, City minister, said: “For too long, politicians have ducked and dodged the decisions needed to support homeownership.
“Simplifying responsible lending rules and putting in place a permanent mortgage guarantee scheme shows our commitment to making the dream of owning a home a reality. I will work closely with regulators and industry to get this done quickly and in a way that supports as many people as possible.”
Matthew Pennycook, housing minister, added: “The affordability challenges facing first-time buyers mean that we now have a generation locked out of homeownership. This government is determined to change that, ensuring that young families and hardworking renters can buy a home of their own.”
This announcement comes after the government said it would improve the house buying and selling process by digitising it.
It also wrote to the Financial Conduct Authority (FCA) following its response to the government’s request that regulators review mortgage rules. The Economic Secretary to the Treasury told the FCA that its review should be “as ambitious and rapid as possible.”
