The Impact of Evolving Mortgage Guarantee Scheme on First-Time Buyers

The Mortgage Guarantee Scheme, initially slated to conclude by December of this year, has now been granted an extension until the culmination in June 2025, courtesy of the Autumn Statement. This government-backed endeavour, tailored to bolster 95% loan-to-value loans, applies to properties valued at a maximum of £600,000.

Since its debut in April 2021, the scheme has effectively facilitated over 37,000 contracts, with an impressive 86% of its beneficiaries falling into the category of first-time buyers.

While the extension signals continued support for those with modest deposits, it's crucial to recognise the scheme's relatively restrained impact. 

“The Mortgage Guarantee Scheme caters to a fraction of prospective homebuyers, as a substantial majority of first-time purchasers lean towards the cost-effectiveness inherent in accumulating a more substantial deposit.”

Importantly, even in the hypothetical scenario of the scheme's discontinuation, its sway on consumer decisions is likely to be marginal. This is attributable to the fact that many lenders already furnish 5% deposit options independently of any government-backed initiatives.

This extension represents the second time the Mortgage Guarantee Scheme has been prolonged, following a precedent set after 2022. Despite the scheme's well-intentioned objectives, potential challenges loom for first-time buyers with average salaries looking to avail themselves of its benefits.

"If a borrower gets into financial difficulty and their property is repossessed, the government will then cover that chunk of the lender’s losses." © Guardian

Data underscores that, on a significant three-quarters of properties within the typical first-time buyer market, individuals with average incomes might find the government's 95% Mortgage Guarantee Scheme financially elusive.