The mortgage guarantee scheme will remain in place permanently, as detailed in the government’s Spending Review.
The scheme was originally brought to market as one of the two Help to Buy lending schemes in 2013, before being relaunched as simply the mortgage guarantee scheme in 2021.
It works by encouraging lenders to offer 95% loan-to-value mortgages by providing a government guarantee on the portion between 80 and 95%.
The scheme was due to expire this month, but from July a permanent version will be launched.
Sarah Thompson, managing director of Mortgage Scout, part of LRG, said: “Although mortgage rates are now starting to fall, the size of the deposit remains the biggest challenge for most buyers.
“A permanent guarantee scheme could bring much-needed consistency to the market and give both lenders and borrowers greater confidence.
“We will be watching closely for the details in July, but the signal from the government is clear: helping buyers with smaller deposits is back on the agenda.”
It emerged in October last year that the government was consulting with the mortgage industry on launching a successor to the scheme.