The UK Treasury has confirmed it will extend the Mortgage Guarantee Scheme by one year.

The scheme has underwritten £4.4bn in low-deposit home loans since it was launched on 21 April 2021.

The government launched the scheme to increase the availability of 95% loan-to-value (LTV) mortgages.

The extension will see the scheme run until the end of December 2023.

Treasury chief secretary John Glen MP says: “For hard-working families facing today’s challenging economic conditions, it’s right that we continue to help them secure their first home or move into their dream home.”

“Extending this scheme means thousands more have the chance to benefit, and supports the market as we navigate through these difficult times.”

Last month, government data revealed that there had been 24,153 mortgage completions through the 95% mortgage guarantee scheme since its launch in April 2021 to the end of June this year.

The total number represented 2.5% of all residential mortgage completions in the UK from the beginning of April to the end of June 2022.

This is an increase compared to the period ending in March this year with 6,157 more completions under the scheme.

The corresponding value of these guarantees is £641m while the overall value of loans supported by the scheme is £4.4bn. These mortgages were used to finance properties worth £4.62bn in total.

It showed that 85% of mortgage completions through the 2021 mortgage guarantee scheme to date have been for purchases by first-time buyers.

Most mortgage completions through the scheme to date were on terraced houses, making up 35% of total completions.

Some 24% of completions in the scheme were on flats or maisonettes, while completions for detached houses and bungalows are much lower, making up 7% and 3% of the total respectively.

Compared to total mortgage completions in each region, the scheme supported a higher proportion of mortgages in the South East, North West and Scotland. In comparison, it has seen a lower proportion in London and Northern Ireland.

The mean value of a property purchased or remortgaged through the scheme was £191,378 compared to a national average house price of £295,903.

Measures to help people get onto the property ladder were also put in place by former chancellor Kwasi Kwarteng in September’s mini-budget and the current chancellor Jeremy Hunt in the Autumn Statement.

The September stamp duty cuts consisted of the nil-rate band being doubled to £250,000 and the first-time buyer (FTB) threshold increasing to £425,000.

Alongside this, the value of a property on which FTBs can claim relief was upped to £625,000.

In the Autumn Statement, Hunt confirmed that these measures will end in early 2025.

Quilter mortgage expert Charlotte Nixon says: “The news that the government has extended its 95% mortgage scheme should help first-time buyers purchase their first home amid what is a trying time for them.”

“They face issues ranging from inflated house prices, inflation rapidly eating away at their deposits, and the rising cost of living disrupting their ability to save, all against a backdrop of successive interest rate hikes.”

“To make matters worse, since the mini-budget, scores of higher loan-to-value mortgage deals have been taken off the market, leaving little choice for those who have been able to save enough for a deposit. Before September, the 95% scheme had had fairly little take-up largely because lenders had their own deals, and buyers were going directly through them.”

“However, since the huge changes in the market prompted in part by the turmoil produced by the mini-budget, these deals have become rarer, although not completely extinct. The popularity of the scheme may therefore soar next year as potential buyers are pushed into the scheme due to a lack of choice elsewhere.”

“While the industry should be supportive of anything that helps get people on the property ladder, having a very high loan-to-value mortgage does expose buyers to the risks of negative equity. If house prices do drop, then only having 5% equity in a property does not leave the buyer with much equity to play with.”

While 95% deals are few and far between, Own New announced this morning that is it going to launch a 95% LTV mortgage product with Darlington Building Society early next year, alongside more than 50 housebuilders.

The product, open to first-time buyers (FTBs) and home movers buying new homes, will initially be available in the North East and Yorkshire but is set to expand nationwide.