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Mortgage guarantee scheme supports over 6,000 mortgages valued at £1.2bn

  • 17/02/2022
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Mortgage guarantee scheme supports over 6,000 mortgages valued at £1.2bn
Around 6,535 mortgages have been completed through the government’s mortgage guarantee scheme between April and September 2021, with loans coming to a total value of £1.2bn.

According to the HM Treasury’s latest figures, this represents three per cent of all residential mortgage completions in the UK during this period.

The mortgage guarantee scheme for 2021 opened in April and was available across the UK until the end of December.

The government offered lenders the choice to purchase a guarantee on mortgage loans where borrowers have a deposit of less than 10 per cent. It can be used for new build, existing homes, first-time buyers, home movers and remortgagors subject to eligibility criteria.

The figures show that completions have been steadily growing, going from 51 in May to 760 in June and then ramping up to over a thousand in July and August and nearly 3,000 in September.

The report said the total value of the government guarantee came to £179m, and the total value of properties was around £1.3bn.

First-time buyers major scheme users

Around 84 per cent of mortgage completions through the scheme came from first-time buyers with 5,509 completions.

Take-up of the scheme was mainly from those on lower incomes, with over half using the scheme having a household income up to £50,000. Those with an income of £80,000 or more only made up 21 per cent of completions.

Around 64 per cent of completions through the scheme were in England, but the scheme also proved popular in Scotland with around 27 per cent of completions coming from this region.

Within England, around 12 per cent of completions came from the South East, followed by the North West with 11 per cent and East of England at eight per cent.

The North East and London had the lowest completions at four per cent apiece.


Value and type of property

The mean value of the property purchased or remortgaged though the scheme to the end of September was around £196,702, which compares to an average UK house price of £269,945.

Some 27 per cent of all mortgage completions to date were up to £125,000, and 63 per cent of properties were £200,000 or less. Just under a quarter were on properties value at 250,000 or above.

Over a third of completions were for terraced houses, 22 per cent were for flats or maisonettes, whilst detached houses and bungalows accounted for eight and three per cent respectively.


Mortgage guarantee scheme ‘clearly not helping generation rent’

Karen Noye, mortgage expert at Quilter, said the first set of data about the mortgage guarantee scheme was “disappointing” with just 812 mortgage completed between April and June, but she said it was understandable as the scheme had only been active for a few months and some buyers may not have completed.

She said the current figures for the six months from April to September, which showed 6,535 mortgage having been completed under the scheme, still “pales in comparison to the number of first-time buyers looking to get a foot on the property ladder”.

Noye said: “This low figure exposes a scheme that is clearly not helping generation rent as much as hoped. With house prices remaining incredibly high there are a number of reasons why people may be opting to not take advantage of the scheme. Firstly, if house prices do drop, as is predicted this year now that interest rates are on the rise and the stamp duty holiday is gone, it doesn’t take much for new homeowners to find themselves in negative equity.

“This will mean borrowers will face an uphill struggle if they want to sell their homes as they will need to cover all the negative equity to redeem the existing mortgage, moving costs and a deposit for the new purchase. This could leave them trapped in their home until the market bounces back.”

She added that new ways of working remotely had remained popular, pointing to hybrid approaches and working from home, but there was still uncertainty so some workers will be “waiting to see how their working life evolves before they make a big decision like buying a house”.

Noye continued: “Once people’s post-pandemic life is more clear there may be more people looking to buy and therefore use the scheme.”

She concluded: “The data does show that the number of people using the mortgage guarantee scheme picked up in September so future releases may show more people taking advantage of 95 per cent loan to value mortgages. However, for the moment the scheme does not look to be the success the government might have hoped.”

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