Mortgage guarantee scheme closing

The Help to Buy Mortgage Guarantee scheme will close on 31 December 2016.

Launched in 2013, the scheme allows lenders to offer deposit loans as low as 5% to people purchasing a home in the UK.

Use of the scheme has declined over the past year, with loans accounted for only 3% of total mortgage lending for house purchases in Q1 2016, compared to 6% in 2014.

However, in a letter to chancellor Philip Hammond, Bank of England governor Mark Carney said that the closure of the scheme wouldn’t affect the provision of finance to prospective mortgagors and high loan to value (LTV) borrowers.

In the letter, Carney wrote:

“Loans within the scheme do not appear riskier than high LTV loans outside of the scheme. Introducing the cap on scheme loans at 4.5 times income has also prevented a tail of highly indebted borrowers from building up.”

“Furthermore, mortgages inside the scheme represent less than 1% of the stock of mortgages and make up a relatively small proportion of large lenders’ books.”

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