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Mortgage guarantee may be ‘underwhelming’ but its importance can’t be ignored – Bamford

by: Patrick Bamford, business development director at AmTrust Mortgage and Credit
  • 26/04/2021
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Mortgage guarantee may be ‘underwhelming’ but its importance can’t be ignored – Bamford
To hear the government’s mortgage guarantee scheme described as ‘underwhelming’ before we even saw the first products seemed perhaps unduly harsh, especially when it acted as a catalyst for the launch of 95 per cent loan to value (LTV) products from lenders not involved in it.



I fully understand why Intermediary Mortgage Lenders Association’s (IMLA) Kate Davies referred to it in such a way – and to be fair she has a point – as it is based on the previous Help to Buy iteration of the scheme 

That was none too flexible and somewhat costly, but in a sense I’m not sure that really matters too much. 

Of course, it will matter to those lenders who have already committed to being part of the scheme. because they will have to pay the fee to take part and will be judged on the pricing and quality of the products they bring to market.  

There were also conflicting reports around what those products might look like. Some suggested they would not be able to compete with what has already been launched by other lenders, while differing opinions anticipated market-leading rates and criteria.  


Returning confidence 

Certainly, from a PR perspective it made sense for the larger high street operators to tie their flags to the Budget announcement pole, so to speak.  

And they would have done so based on the knowledge that the scheme would almost be a mirror-image of what the previous government guarantee looked like. 

However, the market has undoubtedly moved on in the last eight years when that was launched, and it will therefore be interesting to see what the level of commitment is from the mainstream lenders going forward 

They have to offer a five-year fix – what will they be able, or want, to offer beyond that? 

But, as mentioned, I’m not so sure the ‘devil in the detail’ argument around this ‘new’ scheme is very relevant, because it undoubtedly brought a level of confidence back to the 95 per cent LTV market.  

It has pricked up the ears of lenders who – let’s be honest – would have taken much more time to get back into this sector, without any government intervention. 

This is as relevant for those using the scheme and those who are not. 


Serving demand 

As the provider of private mortgage insurance in this sector, we’ve certainly seen an increase in appetite and interest in our offering from both existing clients and those looking to use a different guarantee alternative. 

Coupled with those lenders who now appear willing to take the risk on their balance sheet, this has had an immediate impact with a steady stream of lenders announcing new 95 per cent LTV products.  

At the time of writing, according to Moneyfacts we’ve seen an increase from five products – which all required some sort of parental support or guarantor – to 34.  

That has grown through April and the anticipation has to be that it will continue to in May too.

So, while the government’s scheme might be ‘underwhelming’, we can’t underestimate its importance, its ability to get lenders signed up, and its impact in terms of creating confidence and appetite to lend.  

Where once there was none, now there is growth.  

And we should I suppose be grateful for the government intervention, the results it has already created and the increasing number of products that will benefit those aspirational homeowners. 


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