A report in The Financial Times said that the Chancellor was planning on announcing the permanent mortgage guarantee scheme in her upcoming Mansion House speech on 15 July.
The mortgage guarantee scheme will support first-time buyers onto the property ladder and was a manifesto commitment of the government.
Freedom to Buy Mortgage Scheme to Support First-Time Buyers
The scheme was initially introduced by the Conservative government during the pandemic to preserve higher loan to value (LTV) lending, which had retreated due to financial and economic volatility.
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The scheme works by offering lenders a government guarantee on a portion of the mortgage so that some or all of the shortfall is covered if the house is repossessed or sold for less than the outstanding mortgage amount.
Reeves had confirmed that it would launch the permanent mortgage guarantee scheme in July to “ensure the consistent availability of mortgages for buyers with small deposits”.
Previous mortgage guarantee schemes
The most recent figures from the HM Treasury of the previous mortgage guarantee scheme, which was wound up at the end of June, show that completions under the mortgage guarantee scheme have totalled 53,261 since its launch.
This represents around 1.4% of all residential mortgage completions during the past three years.
Although the scheme represents a relatively small proportion of total lending, it played a role in supporting the availability of 95% LTV products during periods of volatility. A permanent version could provide greater certainty for lenders considering higher loan-to-value-ranges.
