The Government has announced it will extend the Mortgage Guarantee Scheme by a year to the end of December 2023.

It was previously set to finish at the end of 2022.

The scheme helps people with 5% deposits on to the property ladder by giving lenders financial guarantees to provide mortgages that cover the other 95%.

Lenders reduced the availability of these low deposit products during the Covid-19 pandemic, with just eight 95% LTV products remaining in January 2021. The Mortgage Guarantee Scheme helped restore competition and consumer choice to the market.

The government said the Scheme has already helped over 24,000 households get onto the property ladder since its launch in 2021. The majority – 85% – of those helped are first-time buyers.

Chief Secretary to the Treasury, John Glen MP said: “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 house.

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

Charlotte Nixon, mortgage expert at Quilter, added: “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.

“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.”