It is normal practice when a Government Department proposes to undertake a contingent liability in excess of £300,000 and for which there is no statutory authority, for the Minister concerned:
to present a departmental minute to Parliament, giving particulars of the liability created and explaining the circumstances; and
to refrain from incurring the liability until 14 parliamentary sitting days after the issue of the minute, except in cases of special urgency.
I am writing to notify Parliament of a contingent liability that has been created by the Government from the introduction of the new mortgage guarantee scheme. The scheme will be open to new mortgages submitted by participating lenders from 19 April 2021, but the liability will not be incurred until lenders start to submit mortgages to the scheme, which is not expected until May at the earliest.
By way of background, the mortgage guarantee scheme was announced at the Budget on 3 March 2021. The scheme will provide a guarantee to lenders across the UK who offer mortgages to people with a deposit of 5% on homes with a value of up to £600,000. Under the scheme all buyers will have the opportunity to fix their initial mortgage rate for at least five years should they wish to. The scheme, which will be available for new mortgages up to 31 December 2022, will increase the availability of mortgages on new or existing properties for those with small deposits. The guarantee will be valid for up to seven years after the mortgage is originated.
Exposure against this contingent liability would take place in the event that the sum of commercial fees paid by lenders would not be sufficient to cover calls on the guarantee. There will be a cap on the size of the Government’s contingent liability under the scheme of £3.9 billion.
Authority for any expenditure required under this liability will be sought through the normal procedure. HM Treasury has approved this proposal.
I will also lay a minute today on this matter.