Budget 21: Will the Mortgage Guarantee Scheme work?

Jake Carter

March 4, 2021

Twenty7Tec have questioned whether the new Mortgage Guarantee Scheme will work by analysing data from the UK’s biggest lenders who have already committed to the scheme.

During the Budget yesterday, Chancellor Rishi Sunak (pictured) introduced a new Mortgage Guarantee Scheme in order to encourage lenders to offer 95% LTV mortgages.

Lloyds, NatWest, Santander, Barclays and HSBC with Virgin Money have all confirmed that they will accept applications through the scheme.

According to research by Twenty7Tec, who analysed figures against those lenders, the current scheme would only cover 35% of mortgages requested.

Pre-COVID, several other building societies and banks delivered the majority of 95% plus mortgages.

In particular, six other lenders in the top 10 make up an additional 40% of the 95% plus mortgage documents produced Twenty7Tec’s system.

Phil Bailey, director at Twenty7Tec, said: “That means until the scheme has signed up the remaining large lenders, the scheme will not function as planned.

“The terms for the lenders to sign up are clear, but the five-year term is one that might skew some of their models and make them think twice about the risk involved.

“That’s magnified by the potential for interest rate rises over the five years due to existing inflationary pressures.

“Equally, of course, if these lenders don’t enter the government’s Mortgage Guarantee scheme, they are at risk of watching their leading position in the 95%+ range eroded by the largest lenders.”

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