Government Offers Permanent Mortgage Guarantee Scheme

The government has confirmed that a new, permanent mortgage guarantee scheme will be available to lenders from July.

In a new update, the government confirmed it recognises, as do most people in the finance industry, there is a need to help first time buyers and younger buyers with lower deposits, perhaps because they are paying rents that are equivalent to a mortgage payment and unable to build a huge savings pot for the 10%-25% deposits that are needed to secure a mortgage.

95% Loan to Value (LTV) Guarantee

The government has confirmed it will make a new high loan to value mortgage guarantee scheme, underwritten by the government, available to lenders in July.  This means lenders will be protected by government guarantees where they offer 95% LTV mortgages with 5% deposits when they default, go wrong or borrowers get into difficulty.                                                                                                                     

High Loan to Income Multiple (LTI) Restrictions Lifted

The availability of 95% mortgages has been lower given restrictions for mortgage lenders in that they could only lend mortgage lenders a maximum cap of 15% of total new mortgage lending per annum could be made to borrowers with a loan to income (LTI) ratio of 4.5 x income or more.  This was removed last week and now each individual mortgage lender can have up to 15% of its total lending ‘book’ with high LTI (4.5 x income and higher) loans rather than restrict it to 15% of all new mortgage lending per annum.

See High Loan to Income

Comment

Those with low deposits will welcome the news.  Mortgage lenders with lending capacity will also welcome the news that the numbers of higher LTI multiple mortgages will no longer be capped and now a new government backed guarantee scheme will protect them.

Property prices will rise as demand increases at the ‘starter home’ level that will ripple up the ladder as more people will also be able to step up the ladder to buy larger properties as they scale up e.g., when starting or growing their families.