Increase in the number of buyers using the mortgage guarantee system to 95%

A total of 6,535 properties were bought with the new government help to buy a mortgage guarantee scheme between April and September this year.

The latest data — covering the period from the launch of the program on April 19 to the end of September — shows that 84% of these mortgages were taken out by first-time buyers.

The total value of mortgages supported by this program was £1.2 billion.

The number of people using this program has increased significantly, with only 812 mortgage completions recorded between April and June.

Figures show that relative to the total number of mortgages in each region, the scheme supported a higher proportion of mortgages in the South East and Scotland, and a lower proportion in London, the North East and in Northern Ireland.

The average value of a property purchased or mortgaged under the scheme was £196,702, compared to a national average house price of £269,945.

The figures show that 27% of all mortgages completed under the scheme to date are for properties in the lowest value bracket, and 63% are for properties worth £200,000 or less. Only 24% of mortgage completions are for properties valued at £250,000 and above.

The data shows that more than a third (34%) of mortgages under this program were for terraced properties, 28% for semi-detached properties and 22% for apartments or maisonettes. Only 8% of these mortgages were for the purchase of an individual property.

Under this program, the government offers lenders the option of buying collateral on mortgage loans, when the borrower has a down payment of less than 10%. The program can be used for mortgages on new construction and existing homes and, unlike the equity loan purchase assistance program, can be used by first-time buyers, movers and repayers.

The scheme is not available on rental mortgages or second homes and the value of the property must be below £600,000 to qualify.

The guarantee compensates the lenders for part of their losses in the event of repossession of the property.

Karen Noye, mortgage expert from Quilter, says that although the number of users of this program has increased, it does not currently seem to be the success the government hoped.

She says: “The first set of data on the Mortgage Guarantee Scheme was disappointing with only 812 mortgages using the scheme at the end of June, but this was understandable given that it had only been in play for a few months and that many buyers may not even have finished yet.”

These latest figures show higher take-up, but Noye says just over 6,500 mortgages ‘have nothing to do’ with the number of first-time buyers looking to get their foot on the lending ladder. ‘immovable.

“This low figure exposes a scheme that is clearly not helping income generation as much as hoped.”

She says fears of falling prices, potentially trapping 95% of buyers in negative equity, could dampen demand.

She adds: “We are also at an interesting time where the Covid restrictions seem to be gone for good, but the ways of working adopted during the pandemic remain. With some companies forcing people back to their desks and others taking a more hybrid approach, some workers will wait to see how their work life develops before making a big decision like buying a home.

“Once people’s post-pandemic life becomes clearer, more people may be looking to buy and therefore using the program.”

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