The scheme was launched in April last year as higher loan-to-value (LTV) mortgages almost vanished from the market and was due to end on 31 December.

Over the past year, it has helped around 24,000 households with around 85% of those being first-time buyers. The value of mortgage completions was estimated to be around £4.4bn.

How the mortgage guarantee scheme works

The scheme works by offering lenders the option to buy a guarantee on mortgages for borrowers with lower deposits. This compensates lenders for a portion of net losses if the property has to be repossessed.

The mortgage guarantee scheme was introduced in 2021 to increase the availability of 95% loan-to-value mortgages after they were withdrawn during the pandemic.

It offers lenders the option to buy a guarantee on a mortgage where the borrower has a deposit of only 5%. It compensates lenders for a portion of net losses suffered in the case of repossession.

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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.”

It was reported over the weekend by The Sunday Times that an extension of the scheme was on the cards as there are concerns that higher LTV mortgages could be pulled from the market due to recession and expected house price falls.