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First-time Buyer

Low uptake of ‘lifeline’ 95% mortgage guarantee scheme

Paloma Kubiak
Written By:
Paloma Kubiak

The government’s 95% mortgage guarantee scheme has suffered a “disappointing take up” with 18,000 completions recorded since it was launched in April last year.

First announced in the Budget and launched in April 2021, the 95% mortgage guarantee scheme helps first time buyers or current homeowners secure a mortgage with just a 5% deposit to buy a house of up to £600,000. The government offers lenders the guarantee they need to provide mortgages that cover the other 95%, subject to the usual affordability checks.

According to the latest figures from the Department of Levelling Up, Housing and Communities, the value of the government mortgage guarantee is £474m and the value of properties is around £3.42bn in total.

The report revealed there have been 17,996 completions under the scheme since it was launched in April last year, a figure said to be “disappointing by industry commentators.

This represented 6.5% of all residential mortgage completions in the UK between April 2021 and end of March this year.

In the first three months of this year there were 1,692 completions in January, 1,781 completions in February and 2,140 completions in March.

Around 86% of mortgage completions have been from first-time buyers, with completions from this purchaser type pegged at 15,345.

The mean property value is estimated at £190,166, which is compared to the average UK house price of £278,436.

The report added that 67% of properties bought were worth £200,000 or less, 28% were worth up to £125,000, and 21% had values of £250,000 and above.

The majority of borrowers under the scheme have a household income up to £50,000 and the median household income is £46,000. The mean household income is £50,382.

From a regional perspective, England accounted for 68% of total completions, with the biggest regions being North West at 12%, followed by the South East at 11%. All other regions were below 10%.

Scotland made up 23% of completions, while Wales and Northern Ireland accounted for five and three per cent respectively.

‘Should be acting as a lifeline’

Rosie Hooper, chartered financial planner at Quilter, said: “First-time buyers are continuing to face a whole host of issues, from ever-increasing house prices, inflation rapidly eating away at their deposits, and the rising cost of living disrupting their ability to save, all in conjunction with successive interest rate hikes. It is therefore somewhat surprising to see that the number of mortgages completed with the help of the government’s mortgage guarantee scheme remains relatively low, with just 17,996 mortgages completed between April 2021 and March 2022.

“The scheme, which should be acting as a lifeline for those struggling to get on the housing ladder, saw an uptick in popularity in the second half of its first year with 11,461 deals being completed in the six months of October to March 2022 compared to just 6,535 in the six months of April to September 2021. However, while the take up has been modest at best, this is partly as a result of lenders identifying the gap in the market prior to the government’s implementation of the scheme and therefore offering their own 95% mortgage products.

“For example, Nationwide offers a helping hand product, which boosts the borrowing power of first-time buyers and other lenders have similar products aimed at helping those looking to secure a deal in the high loan to value area. Additionally, the low take up may be as a result of the ‘Bank of Mum and Dad’ stepping in to boost first-time buyer deposits to enable them to take out lower LTV deals.