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Help to Buy: Mortgage Guarantee scheme to close at year-end

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Written by: Victoria Hartley
23/09/2016
The scheme which did much to refloat the high loan to value mortgage market is set to close at the end of the year, as the Bank of England suggests the mortgage market is now self-sustaining.

The Help to Buy: Equity Loan and the Help to Buy ISA remain open to new borrowers.

Bank of England governor Mark Carney sent a letter to Chancellor Philip Hammond explaining that the health of the market and dwindling use of the scheme means it should close as planned at the end of the three-year term.

The letter outlines what it called the mortgage guarantee scheme’s ‘decline’, from its peak of 4,362 mortgage loans agreed in July 2014 to 2,973 in April 2016.

“In 2016 Q1, loans in the scheme accounted for only 3% of total mortgage lending for house purchase and 25% of lending at less than 90% loan to value (LTV) compared to 6% and 70% respectively in 2014”, it said.

The scheme was launched by the Lib Dem – Conservative Coalition on 8 October 2013 and roundly credited with kick-starting lending for mortgage borrowers with smaller deposits. NatWest, RBS, Halifax and Bank of Scotland were among the first mortgage lenders to back the Treasury scheme.

The scheme offers lenders a mortgage guarantee of up to 15% of the loan value if a borrower finds a 5% deposit up to a maximum property value of £600,000. Since the launch of the Help to Buy: mortgage guarantee, 78,749 mortgages have been completed with its support. Of these, 79% were purchases by first-time buyers. The total value of mortgages supported by the scheme is £11.6bn to the latest tally in March 2016.

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