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Government extends mortgage guarantee scheme by one year

The Government have announced late yesterday (19 December) that the mortgage guarantee scheme launched in April 2021 is to be extended by a year

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The scheme, originally intended to run to the end of this year, will now extend until the end of next year.

 

Credit Strategy reported yesterday that the scheme extension was likely to be announced, with a government announcement coming this week, this announcement has now taken place.

 

The extension comes as the market faces rising mortgage and interest rates, being spurred on by the ongoing cost-of-living crisis and looming recession. In October, inflation peaked, hitting a 41-year high of 11.1% before dropping down to 10.7% in November.

 

Launched by the government in April 2021 after 95% loan-to-value (LTV) mortgages vanished during the pandemic, the scheme has helped over 20,000 first-time buyers secure home loans with small deposits.

Under the guarantee scheme, banks buy an insurance policy from the government for mortgage loans taken out by buyers with a deposit of less than 10%.

 

The program covers up to 95% of the losses upon failures to keep up repayments and defaults. Between April 2021 and June 2022, 24,153 mortgages worth £4.4 billion were underwritten as a result of the scheme, with many of them belonging to first-time buyers.

 

The Bank of England (BoE) has previously warned that people with mortgages are likely to come under greater financial pressure in 2023 but are in a stronger position than those who faced previous recessions, such as the 2008-09 financial crisis.

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