{"id":44168,"date":"2023-11-30T14:19:00","date_gmt":"2023-11-30T14:19:00","guid":{"rendered":"https:\/\/histarmar.net\/?p=44168"},"modified":"2023-11-30T14:19:00","modified_gmt":"2023-11-30T14:19:00","slug":"first-time-buyers-face-stark-reality-with-limited-mortgage-guarantee-scheme","status":"publish","type":"post","link":"https:\/\/histarmar.net\/world-news\/first-time-buyers-face-stark-reality-with-limited-mortgage-guarantee-scheme\/","title":{"rendered":"First-time buyers face ‘stark reality’ with ‘limited’ Mortgage Guarantee Scheme"},"content":{"rendered":"

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The Government-backed Mortgage Guarantee Scheme has been extended to 2025, but experts are arguing the reach \u201cis limited\u201d and has only had a \u201cmoderate impact\u201d on the housing market.<\/p>\n

The scheme was launched by the Government in 2021 to help more Britons get on the housing ladder, primarily by increasing the availability of 95 percent Loan to Value (LTV) mortgages.<\/p>\n

It aims to help borrowers with fewer savings take out a mortgage with a five percent deposit on a home worth up to \u00a3600,000.<\/p>\n

The Government also provides a partial guarantee to the mortgage lender, covering up to 15 percent in case the borrower defaults on repayments. This assurance gives confidence to lenders, encouraging the reintroduction of higher loan-to-value mortgages.<\/p>\n

The scheme was supposed to come to an end this year, but Chancellor Jeremy Hunt announced its extension by 18 months during the Autumn Statement last week.<\/p>\n

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However, Karen Noye, a mortgage expert at wealth management firm Quilter, said: “Following the news last week that the Government plans to extend the mortgage guarantee scheme until June 2025, new data shows that the scheme has provided only a moderate impact on the housing market since its launch on April 19, 2021.<\/p>\n

\u201cBy the end of June, 39,252 mortgages have been completed under this scheme.\u201d<\/p>\n

However, with the mean value of properties purchased or remortgaged through the scheme standing at \u00a3199,245, which is significantly lower than the national average house price of \u00a3287,546, Ms Noye said its reach \u201cseems limited\u201d.<\/p>\n

She explained: \u201cThis gap indicates that first-time buyers, often constrained to loans of about 4.5 times their annual income, face a stark reality.<\/p>\n

\u201cFor an average earner, this translates to a borrowing limit of just over \u00a3150,000, offering limited options in the housing market. Therefore, building a larger deposit or seeking financial help from family sources often becomes necessary to broaden their market choices.<\/p>\n

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\u201cThe extension of the scheme, though well-intentioned, may not significantly alter the current market dynamics.\u201d<\/p>\n

Rightmove property expert Tim Bannister said: \u201cAny support for those with the smallest deposits is always welcome, however in reality the scheme is only able to help a very small portion of movers.\u201d<\/p>\n

However, he noted: \u201cThe proportion of mortgages that are taken out at the highest Loan-to-Value bracket is very small, with the majority of first-time buyers preferring to get the affordability benefits of saving for a bigger deposit.\u201d<\/p>\n

He said this makes the scheme \u201cvery limited\u201d, and movers, particularly first-time buyers, may have been hoping for more to be announced during the budget.<\/p>\n

Ms Noye also noted the \u201ctangible concern\u201d regarding negative equity, especially for those who purchased right at the top of the market.<\/p>\n