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Mortgage guarantee scheme completions edge up to 41,000

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  • 07/02/2024
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Mortgage guarantee scheme completions edge up to 41,000
Some 41,052 mortgages have been completed through the government’s mortgage guarantee scheme, accounting for 1.6 per cent of the total market.

Figures from HMRC show this represents activity from the scheme’s introduction in April 2021 up until September 2023. 

There have been 1,864 more completions since the last dataset was released in June. 

The government has provided £1.1bn to support mortgage loans worth £7.8bn, and these mortgages were used against properties worth £8.3bn in total. 

Some 86 per cent of borrowers through the scheme have been first-time buyers, while the average household income of people using the scheme is £54,816. 

Most people using the mortgage guarantee scheme have a household income of up to £50,000 and represent 51 per cent of completions. Just 13 per cent of people using the scheme have a household income of more than £80,000. 

Terraced homes made up the largest share of the type of home purchased or remortgaged using the scheme at 35 per cent, followed by semi-detached houses with a segment of 30 per cent. Flats and maisonettes were the third-most-popular property type, making up 23 per cent of the scheme’s completions. 

Some 24 per cent of homes lent against using the scheme had a value of up to £125,000, equivalent to the 24 per cent of properties completed against worth between £150,001 and £200,000. 

There were fewer completions against higher-value properties, with just two per cent of activity for homes worth between £500,001 and £600,000 and seven per cent of homes with a value of between £350,001 and £500,000. 

Overall, just a quarter of completions are on properties worth more than £250,000. 

The average value of properties purchased or remortgaged through the scheme came to £201,313. 

 

Mortgage guarantee scheme doesn’t address wider issues 

Karen Noye, mortgage expert at Quilter, said: “Despite its low take-up, for those that have used it, it has been a lifeline. However, when we dive into the numbers, the average property purchased through the scheme is valued at £201,313, noticeably below the UK average house price of £291,000. This clearly shows the scheme’s focus on the more affordable segment of the housing market, with three quarters of the properties bought valued at £250,000 or less. 

“The scheme primarily attracts individuals and families with household incomes of £50,000 or less, underlining its appeal to those aiming to step onto the property ladder without hefty financial backing. But, there’s a significant hurdle: the borrowing limit, typically capped at four-and-a-half times one’s annual income. For many earning an average salary, this means they can borrow just a bit over £150,000, significantly limiting their choices in a tight housing market.”

Noye added: “The government’s decision at the Autumn Statement to extend the scheme until June 2025 provides ongoing support, but doesn’t necessarily change the game for prospective homeowners. It’s a helpful measure, yet it stops short of addressing the broader issues of affordability and access in the housing market. The concern over negative equity, especially for purchases at peak prices, adds another layer of caution for participants.  

“Therefore, rumours of the government introducing 99 per cent mortgages during the budget seem unlikely in this unpredictable housing market. However, house prices according to most indices have been climbing, so the government may feel vindicated to bring this type of mortgage back.” 

 

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