Mortgage lenders to urge Kwarteng to extend guarantee scheme

According to Sky News, executives from major banks and the country’s largest building society Nationwide were preparing to ask Kwarteng to commit to a renewal of the Mortgage Guarantee Scheme.

The scheme, launched late last year, allows lenders to underwrite losses on mortgages over 80% of a property’s purchase price through the government.

It comes as hundreds of mortgage deals were pulled from the market in the last 10 days, as part of the fallout from the financial turmoil caused by Kwarteng’s uncosted ‘mini-budget’.

Sky said bosses from Barclays, Lloyds Banking Group and NatWest Group were among those expected to attend the talks on Thursday, with a Treasury source reportedly saying the banking trade group UK Finance would also be there.

The chancellor’s mini-Budget would have originally seen the axing of the top 45p rate of income tax, as well as a rolling back of the National Insurance contributions implemented earlier this year.

A lowering of tax combined with a deliberate lack of accounts from the Office for Budget Responsibility caused chaos in the financial markets, with sterling reaching its lowest ever exchange rate against the dollar and gilt yields rocketing.

That led to lenders taking hundreds of mortgage deals off the market amid fears of more aggressive rate hikes from the Bank of England.

Kwarteng and prime minister Liz Truss were forced to u-turn on the 45p rate at the Conservative Party conference earlier this week, as many of the party’s MPs threatened rebellion.

Reporting by Josh White at Sharecast.com.