The scheme launched in April 2021 and by 30 September 2022 had been used to support 30,398 mortgages, according to the Treasury.

How the mortgage guarantee scheme works

The scheme works by offering lenders the option to buy a guarantee on mortgages for borrowers with lower deposits. This compensates lenders for a portion of net losses if the property has to be repossessed.

The mortgage guarantee scheme was introduced in 2021 to increase the availability of 95% loan-to-value mortgages after they were withdrawn during the pandemic.

It offers lenders the option to buy a guarantee on a mortgage where the borrower has a deposit of only 5%. It compensates lenders for a portion of net losses suffered in the case of repossession.

First-time buyers make up bulk of purchases

First-time buyers made up 85% of the purchases with the total value of loans supported by the scheme coming in at £5.6bn.

Buyers in the South East, North West and Scotland were most likely to have used the guarantee scheme, with those in London and Northern Ireland least likely.

Properties bought far below UK average price

The average property bought through the scheme was worth £194,300 – significantly less than the national average of £294,559.

The scheme is not available for buy-to-let mortgages or second homes and the property value must be £600,000 or less.

Closure at end of 2023

The scheme was initially due to finish at the end of last year but has now been extended until the end of 2023.

Karen Noye, mortgage expert at Quilter, said: “The 95% mortgage guarantee scheme still remains a relatively unpopular scheme given this economic backdrop. Since the scheme’s launch in September 2022 only just over 30,000 mortgages have completed using the scheme.

“Some of the reasons for this include that some lenders have been reluctant to participate in the scheme, leading to limited options for potential borrowers. As such, borrowers have opted for 95% deals outside of the scheme that might offer more competitive prices.

“The 95% mortgages are also very expensive so many people may try and hold out until they can afford a slightly larger deposit. However, with inflation causing significant strain on finances for those desperate to get on the housing ladder, these types of schemes may end up gaining momentum in the next year.”