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Mortgage guarantee scheme reports nearly 40,000 completions since launch

Mortgage guarantee scheme reports nearly 40,000 completions since launch
Shekina Tuahene
Written By:
Shekina Tuahene
Posted:
29/11/2023
Updated:
29/11/2023

The Mortgage Guarantee Scheme has supported around 39,253 completions since it was launched in 2021, with the vast majority being first-time buyers.

According to the latest figures from the HM Treasury, this represents around 1.6% of all residential mortgage completions during the period. The value of the mortgage loans is around £7.4bn and the value of the Government guarantee is estimated at £1.1bn for the period. The total value of properties in the period is £7.8bn.

The figures show that in 2021 the scheme supported 12,230 completions, going up to 23,119 in 2022. This year so far, the number of completions is 3,824.

How the scheme works

The scheme was launched in April 2021 in response to higher loan to value mortgages almost disappearing from the market during the pandemic.

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 guarantee applies down to 90% of the purchase value to the property, covering 95% of net losses. The lender retains 5% risk in the portion of losses covered by the guarantee.

Average property value nearly £200,000

Breaking the figures down, the mean value of property bought or remortgaged with the scheme is £199,245, which compares to an average UK house price of £287,546.

The median property value comes to £175,000, reflecting a higher proportion of properties in the scheme coming from lower value bands.

Around a quarter of properties are valued up to £125,000, with a further 52% sitting between £125,000 and £250,000.

Approximately 23% of mortgage completions are on properties valued over £250,000.

Looking at property type, 35% of properties are terraced houses, 30% are semi-detached and 24% are flats or maisonettes.

Detached houses came to 7%, bungalows 3% and other types make up 2%.

First-time buyers primary users of scheme

From a borrower perspective, over half of households who completed a mortgage with scheme have an income up to £50,000.

Those on higher incomes over £80,000 made up 13% of completions.

The median household income for borrowers using the scheme is £48,769, with mean household income pegged at £53,158.

The report added that 86% of mortgage completions through the scheme were first-time buyer purchases, equal to 33,766 completions overall.

Regional differences

Looking at regions, England made up 69% of completions since the scheme was launched, followed by Scotland at 23%, Wales at 5% and Norther Ireland at 3%.

Within England, the North West made up the largest proportion of completions at 12% followed by the South East at 11% and the East Midlands and East of England at 8% respectively.

London was the lowest in England at 4%

In last week’s Autumn Statement, the Chancellor Jeremy Hunt said that the scheme would be extended to 2025.