22 November 2023
If you are covering the news that the Mortgage Guarantee Scheme will be extended until June 2025, please see the following comment from Karen Noye, mortgage expert at Quilter:
"The extension of the mortgage guarantee scheme until June 2025 is really the least the government can do for first time buyers. The scheme has so far not been particularly impactful and will likely continue not to be. Generally, first time buyers will find themselves limited to a maximum of 4.5 times their annual income. For those on the average salary this means they can only borrow just over £150k giving the buyer not much choice in the market. Saving for a bigger deposit or raiding the Bank of Mum and Dad can therefore offer more choice. This extension makes little difference today and had Hunt instead opted to simply get rid of it, it likewise wouldn’t have had much impact.
“With such a high LTV there is also the risk of negative equity, which is a significant concern in this property market, especially for those who purchase properties at peak prices. If the housing market experiences a downturn, individuals who utilised the scheme may find themselves in a challenging financial position, struggling with negative equity and limited mobility. This situation could be further exacerbated if they need to sell their homes, as they would have to cover the negative equity, moving costs, and a new deposit. Therefore, while the scheme's intentions are positive, it's crucial to implement measures that ensure long-term stability for new homeowners and the housing market. This might include more stringent eligibility criteria or additional support mechanisms to safeguard against market fluctuations.”
