A mortgage guarantee scheme designed to help people climb the real estate ladder is set to be extended by a year.
The government said the scheme, which should be completed at the end of December, would help shoppers “navigate through difficult times”.
It was originally developed to encourage lenders to provide home loans to people offering a 5% down payment – a product that was far less available during Covid.
Some lenders are still playing it safe as buyers confront the rising cost of living.
Chief Secretary to the Treasury John Glen said: “For hard-working families faced with today’s challenging economic conditions, it’s right that we continue to help them secure their first home or move into their dream home.
“The extension of this program means thousands more have the opportunity to benefit and supports the market as we navigate these difficult times.”
- Interest rates raised to highest level in 14 years
- Millions face a £250 monthly mortgage increase over the next year
- What will happen to real estate prices?
The mortgage scheme has a limit of £600,000 and is mainly used to help first-time buyers.
These 95% loan-to-value mortgages are often considered riskier by banks because they are more vulnerable to falling home prices when there is a risk of people owing more than their home is worth.
Under the scheme, the government assumes some of the risk and compensates the lender for part of the loan if the property is repossessed.
It started in April last year and the government said it has helped more than 24,000 households.
Some brokers have indicated that the program has done its job by bringing more low-deposit mortgages to market, but others have indicated that only a small number of lenders have used the program.
Many mortgage lending providers generally only award to people with a regular income, regardless of government incentives, and still carry out affordability tests.
Unemployment figures are expected to rise and the UK housing market to slow.
A recent survey by the Home Societies Association found that 14% of people thought now was a good time to buy a property, but 47% thought now was not a good time to buy a home.
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