In mid-July, Chancellor Rachel Reeves announced the return of the Mortgage Guarantee Scheme, a move by the Treasury aimed at reinvigorating the residential housing market. The scheme sets to revamp mortgage borrowing, doubling down on the previously trialled 5% deposits, but this time making them a permanent fixture.
The initiative is part of the wider Leeds Reforms package and promises to ease one of the most significant barriers to homeownership, the daunting deposit hurdle, not only for first-time buyers, but also those struggling to get back on the ladder. The scheme has been broadly welcomed by the housing and financial sectors, but what does it mean in practical terms for homebuyers, lenders, and of course, surveyors?
What’s changing?
In short, the government will now guarantee mortgages of up to 95% loan-to-value (LTV), giving lenders the confidence to offer low-deposit mortgages. The idea is that, with the government taking on a portion of the risk (up to a cap of £3.2 billion), more banks and building societies will have the confidence to approve high LTV mortgages that might otherwise feel too risky.
In addition to this, lenders are being encouraged to increase high loan-to-income (LTI) mortgages, meaning some buyers may be able to borrow more than 4.5 times their annual income. Some lenders have already welcomed this shift; Nationwide having already expanded their “Helping Hand” mortgages to stretch up to six times the income in certain cases. By stretching affordability boundaries this should, in theory, make homeownership more attainable, with the government expressing that the scheme could help unlock around 36,000 new mortgages in the first year alone.
A knock-on effect for surveyors
From a surveying perspective, this news is largely positive. An increase in mortgage approvals means more home purchases, which in turn will inevitably lead to more mortgage valuations and home surveys for buyers.
A month on from the introduction of the scheme and work volumes coming into the business have noticeably increased, whether this is a direct result of the scheme or due to other factors is yet to be seen. This uptick in work volume will be a boon for bringing money into the business but does come with a few caveats.
For firms already under pressure from tight turnaround times, this may require a bit of recalibration. If the scheme really does unlock a flood of first-time buyers, we could see lead times stretch, especially in hotspots where affordable homes are already in short supply.
But overall, it’s a welcome shake-up that could put surveyors front and centre again in the buying journey, not just as a formality but as an essential cog in getting deals over the line safely.
A step in the right direction
There’s a lot to like about this scheme. It gives people a chance to buy who might otherwise be locked out, and it sends a clear message that the government wants to get the housing market firing on all cylinders. However, it’s not a silver bullet. Increasing buyer access without addressing the underlying shortage of homes might add pressure to prices in some areas. And with mortgage costs still on the high side, stretching affordability too far could lead to difficulties down the line.
Overall, the new Mortgage Guarantee Scheme is a welcome move for both buyers and the wider market. There’s no doubt this scheme will help more people take that crucial first step into homeownership, which is particularly welcome at a time when higher interest rates and cost-of-living pressures have made saving for a deposit feel out of reach for many.
The scheme provides more opportunities for buyers get on the market and, as a nationwide provider of home surveys and valuations, SDL Surveying is receptive to any move that brings greater accessibility and momentum to the housing market.