Contingent Liability Notification: Mortgage Guarantee Scheme

At this year’s autumn statement, the Chancellor announced that the mortgage guarantee scheme will be extended by an additional 18 months to continue to support homebuyers and movers with smaller deposits. The scheme will now remain open to new accounts until 30 June 2025.

HM Treasury launched the mortgage guarantee scheme in April 2021. The scheme provides a guarantee to participating lenders across the UK who offer mortgages to first-time buyers and existing homeowners with a deposit as small as 5% on homes with a value of up to £600,000. The Government know that access to a deposit can be the largest barrier facing first-time buyers. Since its launch, the scheme has successfully restored the availability of 91% to 95% loan-to-value mortgage products, directly supporting over 37,000 households to buy their homes, overwhelmingly first-time buyers.

While the scheme was due to close to new mortgage applications on 31 December 2023, HM Treasury has decided to extend the scheme by an additional 18 months to continue to provide lenders with the confidence to offer low-deposit mortgages to consumers.

Guarantees issued under the scheme are valid for up to seven years after the mortgage is originated. Participating lenders pay HM Treasury a fee for each mortgage entered into the scheme. This is set so that expected claims against the guarantee should be covered by revenue from the fee.

To continue to provide lenders with confidence, HM Treasury will therefore be extending the duration of the Government’s contingent liability for an additional 18 months beyond the scheme’s planned closing date of 31 December 2023. HM Treasury judges the risk of incurring losses through the scheme to be low, which would only materialise if the sum of commercial fees paid by lenders was not sufficient to cover calls on the guarantee.

Authority for any expenditure required under this liability will be sought through the normal procedure. HM Treasury has approved this proposal in principle. A departmental minute has been laid in Parliament today. If, during the period of 14 parliamentary sitting days, a Member signifies an objection by giving notice of a parliamentary question or by otherwise raising the matter in Parliament, final approval to proceed with incurring the liability will be withheld pending an examination of the objection.

[HCWS66]