What is the Mortgage Guarantee Scheme and how will it help first-time buyers in Birmingham?
The British Government (especially since the 1980s) has always been big on home ownership. Whenever there’s a drop in the market (such as COVID), the Government of the day usually comes up with some scheme or other to get it going again.
The Mortgage Guarantee Scheme will help your average homeowner get (or stay) on the property ladder.
As I’ll explore in this article, that’s potentially crucial. I work as a chartered surveyor for GB Home Surveys in Birmingham, and I can see how much of an impact this scheme might have.
What is the Mortgage Guarantee Scheme?
The Mortgage Guarantee Scheme is one of the Government’s latest initiatives to get first-time buyers on the housing ladder.
To give you a quick idea, lenders can provide a 95% mortgage. In other words, you can buy a house with just a 5% deposit.
The Government has reassured mortgage lenders that they’ll be allowed financial relief if debtors can’t afford repayments. This will enable homebuyers to take advantage (if they’re in a position to do so) of larger loans. Here’s a quick summary of the rules:
- You can buy a home under the scheme with a deposit between 5% and 9.99%.
- You can borrow between 90.01% and 95% of a home’s total cost. The selling cost can’t exceed £600,000.
- It can also be used for flats, with a maximum borrowing amount of £275,000.
- It must be your only home (not a second home or a buy-to-let).
- You can use this scheme with either single or joint mortgages.
- You can’t use the Mortgage Guarantee Scheme for new-build, commercial, or other interest-only mortgages.
Follow this link to the UK Government’s site for a 13-page outline or to read the full rules in a 54-page document.
Using the Mortgage Guarantee Scheme sensibly
The Mortgage Guarantee Scheme aims to provide a much-needed kickstart for the property industry. With rising house prices, young people and other first-time buyers find it increasingly difficult to purchase a house.
However, it must be used sensibly. I know that we’re always talking about it at GB Home Surveys, but the cost-of-living crisis is very real. Just because you have a 5% deposit doesn’t necessarily mean now is the right time for you. It’ll come, without a doubt, but I always recommend getting professional, independent financial advice before you commit to anything.
History of the Mortgage Guarantee Scheme
It was rolled out in April 2021 to combat the withdrawal of large mortgage loans in the COVID lockdowns. Initially, it was scheduled to close to new applications in December 2022, but it’s been extended to 31 December 2023. You have until then to submit your application.
I feel it’s important to point out that not all mortgage lenders are part of the Mortgage Guarantee Scheme. However, most offer 95% mortgages again anyway. Take the time to explore your options if necessary.
How will the Mortgage Guarantee Scheme help first-time buyers in Birmingham?
Birmingham is a (very) busy, packed city. I’m sure you’re familiar with it to some extent.
While we’ve seen the potential for future living standards improvements, there are all too many stories of residents stuck in awful conditions. Most of these are housed in rented accommodations with no way to save their way out.
All around the country, property prices have increased. Rental costs in Birmingham are no exception. Broadly, I’d say they’re similar to other major cities around the UK – about £800 to £900 pcm for a flat and over £1,000 pcm for a house. I know, it’s madness.
However, Birmingham is also among the poorest locations in the UK. The map shown on this ONS page illustrates it perfectly. The southern part of the West Midlands region is generally much better off than Birmingham and its districts.
All this means that escaping the never-ending rental cycle might feel almost impossible for Birmingham residents. The Mortgage Guarantee Scheme might provide a lifeline.
As I mentioned, seeking expert mortgage advice is always recommended before you commit.
I’m a chartered surveyor working for GB Home Surveys in Birmingham and the West Midlands. It’s my job to visit properties people are interested in buying. I check everything in minute detail and compile all my notes and photos into a PDF report, which I’ll then send back to the buyer.
If this is something that would interest you as you’re looking to buy, I’d love to hear from you. Please use the form below to get in touch.
Dean Davies, AssocRICS
