As it was, ‘damp squib’ sort of sums it up, with no movement on stamp duty, no Help to Buy substitute. Just the announcement that the Mortgage Guarantee Scheme would be extended beyond the end of 2023, and is now due to finish in the middle of the year after next.
One wonders if there isn’t something ‘smoke and mirrors’ about the government’s decision to extend its Mortgage Guarantee Scheme, particularly when you consider the relatively small number of completions we’ve seen through it.
According to the latest figures, released by the government at the end of November and covering the first six months of 2023, there were just 3,824 completions under the scheme in the first half of the year.
That compares with over 23,000 in 2022 and 12,320 between the start of the scheme in April 2021 and December 2021.
In other words, there has been a significant dip in the number of completions under the scheme, essentially taking the government monetary commitment down to just £120m for those loans, compared to £637m last year.
The impact of the Mortgage Guarantee Scheme
Now I would be the first to agree that the need for the scheme when it was launched in April 2021 was there for all to see. We had witnessed the number of standard high loan to value (LTV) mortgages – specifically 95 per cent LTV – drop down to barely a handful, and government intervention was required in order to act as a catalyst for this market.
As we have seen, despite some ups and downs in terms of product numbers, we have moved forward to a point where we have a much healthier number of 95 per cent LTV products available to borrowers. There’s no doubting that the seed of that improvement was planted when the scheme was introduced.
Current 95 per cent LTV product numbers are around the 190 mark, despite a significant fall in the middle of 2023. They have climbed back up, and it’s also been positive to see a fall in rates as well, although perhaps not as substantial as we have seen across other product sectors.
But, as can be viewed by the numbers, the vast majority of lenders offering these products are not using the government’s scheme, and instead are either choosing to take the risk on their own balance sheet, or are using private insurance alternatives which are more flexible and less costly.
In other words, the need for the scheme has diminished significantly. We have moved a long way down the road from that early 2021 point, and while of course we’d like to see more lenders offering higher LTV products, it’s unlikely that they’ll choose to use the guarantee scheme now, given the alternatives available to them.
Putting the focus elsewhere
The scheme not only feels like the wrong solution for the wrong time therefore, but – given the diminishing numbers – it also feels like it could be money better spent elsewhere, even if that money commitment is falling.
Perhaps its continuation is because it costs (relatively) peanuts to keep going, and gives the government something to highlight if they are asked about their ongoing commitment to first timers? But, what it doesn’t really do is move the dial any more on first-time buyer numbers, nor does it add greater numbers of product options for that borrower demographic.
In that sense its day has passed.
What would have been preferable is a government commitment to highlighting private alternatives, and using the money they have earmarked for the guarantee scheme in other areas, such as Deposit Unlock which does the same as the state scheme but without any need for taxpayer’s money to be used.
Perhaps greater housing/mortgage market support is coming in the March Budget? It was not apparent in November certainly, and the scheme it chose to keep going with is the one that is likely to do the least in terms of getting first-time buyers onto the ladder.
The next few months should be time for a rethink and a focus on delivering tangible growth options to help many more people.
