Government’s 95% LTV scheme represents 5% of mortgage completions

The scheme, which was announced in March last year, provides buyers with the option to put down a 5% deposit on a home with a value of up to £600,000, to address the problem of higher-LTV mortgages disappearing from the market.

The latest quarterly statistics show that 12,388 mortgage completions from the scheme launch on 19 April to the end of December 2021, represented 5% of all residential mortgage completions in the UK.

While the scheme had a slow take-up in the first six months, completions increased in the final three months of the year with 5,863 from October to the end of December.

Of the total completions, 86% were purchased by first-time buyers.

The report found that the corresponding value of the guarantees was £326m while the overall value of loans supported by the scheme was £2.2bn. The mortgages were used to finance properties worth £2.35 billion in total.

The mean value of a property purchased or remortgaged through the mortgage guarantee scheme to the end of December 2021 was £189,804, compared to an average UK house price of £274,712.

Data found that 28% of all mortgage completions through the scheme to date were on properties in the lowest value band, and 66% were on properties worth £200,000 or less.

Only 21% of mortgage completions were on properties valued at £250,000 and above.

The majority of mortgage completions through the scheme were on terraced houses, making up 35% of total completions.

Flats or maisonettes made up 28% of completions, while completions for detached houses and bungalows equated to 7% and 3% of the total respectively.

On a regional basis, the scheme has supported a higher proportion of mortgages in the South East, North West and Scotland, and a lower proportion in London, the North East, Ireland and Wales.

Commenting on the latest data, Quilter mortgage expert Karen Noye says: “First time buyers are facing a disastrous raft of issues at the moment having suffered from ever-increasing house prices, inflation eating away at their deposits, a rise in the cost of living disrupting their ability to save and now successive interest rate hikes.”

“It is t.fore somewhat surprising to see that only 12,388 mortgages have been completed with the help of the Mortgage Guarantee Scheme, which should be acting as a lifeline for those struggling to get on the housing ladder.”

“The popularity of the scheme has now picked up with around 5,853 more deals being completed in the three months from October to December 2021 compared to 6,535 in the six months of April to September.”

“However, part of the reason the take up has been modest at best is because lenders saw the gap in the market far before the government offered the scheme and started offering their own 95% mortgage products.”

“Another potential reason for the low take up is that first time buyers face such an uphill struggle to get on the housing ladder that the ‘Bank of Mum and Dad’ is playing a huge part in boosting first time buyer deposits enabling them to take out lower LTV deals.”

“Interestingly, 14% of all mortgages completed using the government scheme are not first-time buyers showing that it is proving relatively popular amongst other borrowers, which may illustrate that it is not just first time buyers who are struggling with housing costs.”

“As interest rates increase and people’s finances look less stable against a backdrop of a cost of living crisis, lenders may start to take advantage of the scheme which would compensate participating mortgage lenders for a portion of net losses suffered in the event of a repossession. The guarantee applies down to 80% of the purchase value of the guaranteed property covering 95% of these net losses.”