Just 3% of all residential mortgage completions in the UK were through the government’s mortgage guarantee scheme, according to HM Treasury statistics.

It revealed the total value of the government guarantee came to £179m, and the total value of properties was around £1.3bn.

The mortgage guarantee scheme for 2021 opened in April and was available across the UK until the end of December. It was designed to encourage hesitant lenders back into the highest LTV brackets where product numbers dwindled amid the pandemic, and to help people get on, and up the property ladder.

The government offered lenders the choice to purchase a guarantee on mortgage loans where borrowers have a deposit of 5% (95% LTV). It could be used for new build, existing homes, first-time buyers, home movers and remortgagors.

Completions did steadily grow over the period, from 51 in May to 760 in June and then ramping up to over 1,000 in July and August before peaking at 3,000 in September. But for some mortgage experts, the scheme was “a little too late” as lenders brought out their own low deposit deals at the same time.

First-time buyers major scheme users

Around 84% 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 having a household income up to £50,000. Those with an income of £80,000 or more only made up 21% of completions.

Around 64% of completions through the scheme were in England, but the scheme also proved popular in Scotland (27%).

Within England, around 12% of completions were in the South East, followed by the North West with 11% and East of England at 8%.

The North East and London had the lowest completion rate at 4% each.

Value and type of property

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

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

Over a third of completions were for terraced houses, 22% were for flats or maisonettes, while detached houses and bungalows accounted for 8% and 3% respectively.

Mortgage guarantee scheme ‘has been a damp squib’

Rhys Schofield, managing director at Peak Mortgages and Protection, said: “It’s pretty simple why the numbers are so low. The scheme was floated with much bluster earlier on in the pandemic and by the time it was actually up and running several months later most lenders were offering 5% deals anyway outside the scheme without the government hoops and costs for the lender to jump through.”

Graham Cox, founder of the Bristol-based Self-Employed Mortgage Hub, said: “There are a couple of reasons the mortgage Guarantee Scheme has been a damp squib. Firstly, the main benefit was for lenders, not borrowers. And secondly, it was running alongside the much better known Help to Buy Equity Loan Scheme. Ultimately, borrowers simply weren’t as familiar with it.”

Karen Noye, mortgage expert at Quilter, said the first set of data about the mortgage guarantee scheme was “disappointing” and 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, 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”.