With the Chancellor set to deliver her Mansion House speech later today, Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, has shared her comments on the prospects of a Mortgage Guarantee Scheme for FTBs saying:
“The much-anticipated replacement of the Mortgage Guarantee Scheme is part of the Government’s plan to boost first-time buyers and will be a permanent policy to improve UK growth. Its creation should create a positive sentiment in the market and is designed to encourage more lenders to cater for borrowers with small deposits. As it stands, there are still very few deals on the market aimed at first-time buyers with just a 5% deposit, so any boost to product availability should be welcomed.
“First-time buyers are the lifeblood of the mortgage market, and they have been facing an excruciating situation to afford a mortgage, amid a short supply of affordable housing. Not everyone can be reliant on the ‘Bank of Mum and Dad’ to get a foot onto the property ladder, such as with a guarantor mortgage. This is why it’s so fundamental for lenders to support buyers with small deposits, to keep the market moving. HM Treasury has also stressed any losses incurred through the scheme would be low, and that there is a cap on the size of the Government’s contingent liability of £3.2 billion.
“This scheme, along with lenders relaxing stress tests and the ongoing considerations about loan-to-income rules, is a great combination for first-time buyers struggling to afford a mortgage. However, those borrowing at the higher ends of the loan-to-value spectrum will have little equity in their homes as a result, and disaster could strike if house prices were to plummet. Therefore, seeking advice before entering any arrangement is vital, especially to ensure a deal is picked based on a competitive rate, fees and incentives.”
