The mortgage guarantee scheme was launched by the Conservatives in April 2021 to encourage lending at 95% loan to value (LTV) after several lenders withdrew low-deposit mortgages during the pandemic.
This version of the scheme was closed to new applications on 30 June and in July was replaced by the Labour government’s permanent mortgage guarantee scheme to promote residential lending at 91-95% LTV.
Since launching, the previous mortgage guarantee scheme has supported £11.5bn in loans to finance properties worth £12.2bn.
The value of the guarantees was £1.7bn.
The scheme represented 1.4% of all residential mortgage completions in the UK, and 86% of borrowers have been first-time buyers.
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In Q1, March saw the highest number of completions at 1,461, compared to 842 in January and 877 in February.
Most properties less than the national average price
The average value of a home purchased or remortgaged through the mortgage guarantee scheme was £215,467, compared to the UK average house price of £271,000.
Most completions were for properties worth between £150,001 and £200,000, making up 23% of completions. A fifth of loans were provided for homes worth up to £125,000, while 18% were within the £250,001-350,000 bracket.
Just 2% of mortgages were for homes worth between £500,001 and £600,000.
The most popular property type purchased or remortgaged against through the scheme was terraced homes, accounting for 35% of completions. This was followed by semi-detached, making up 30% of completions, and flats or maisonettes at 22%.
Some 21% of borrowers had a household income ranging from £60,001 to £80,000, followed by 19% with a household income between £40,001 and £50,000 and 18% with a household income from £50,001 to £60,000.
Around 14% had a household income between £30,001 and £40,000.
The majority of completions were in England, accounting for 71% of loans. Some 21% were in Scotland, 5% were in Wales and 3% were in Northern Ireland.
Mortgage guarantee scheme’s impact has been ‘lacklustre’
Holly Tomlinson, financial planner at Quilter, said the figures showed the “lacklustre impact the scheme has had so far, and just how ineffective the government’s permanent version of the scheme is likely to be”.
Tomlinson added: “Mortgage completions supported by the scheme have been tailing off since it first launched, and while there seemed to have been a slight uptick in previous quarters – which may have been driven by more people trying to push through completions ahead of the changes to stamp duty – the take-up has still been relatively low.
“What’s more, the average property value under the scheme was £215,467, significantly below the national average house price of £271,000, which raises questions about the scheme’s ability to cater to those in more expensive parts of the country.”
She said making the scheme permanent might help at the margin, but it did not “create homes or meaningfully lower borrowing costs”.
Tomlinson added: “Without more supply and a clearer path on rates and taxation, the housing market could face a winter of discontent that drags into next year, with even more people shut out.
“This is before you consider the other rumours circulating as we near the Chancellor’s Budget, which would risk further gluing up the market. One such rumour focuses on replacing stamp duty with a proportional property tax. While this would recognise that the current system is deeply flawed, there is a danger of creating new problems. Stamp duty has long deterred older homeowners from downsizing, and any new tax must avoid further locking up family homes at a time of acute shortage.
“Similarly, a levy on sales above £500,000 might sound like a tax on wealth, but in many regions, it would capture ordinary homes. Crucially, the housing market is a ladder, with every sale interlinked. If transactions higher up the chain are taxed heavily, it risks grinding the whole system to a halt, compounding the difficulties first-time buyers already face.”
