A total of 12,388 mortgages have been completed with the help of the government’s Mortgage Guarantee Scheme, new figures published by the Treasury have revealed.

The data, which covers the period since the launch of the scheme on 19 April 2021 to 31 December 2021, showed that 86% of the purchases have been by first-time buyers.

According to the Treasury, the mean value of a property purchased or remortgaged though the scheme was £189,804, compared to a national average house price of £274, 712.

The figures do suggest that the popularity of the scheme increased towards the end of last year, 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, mortgage expert at Quilter, Karen Noye, suggested that part of the reason the take up has been “modest at best” is because lenders saw the gap in the market long before the government offered the scheme and started offering its own 95% mortgage products.

“For example, Nationwide has a helping hand product, which boosts the borrowing power of first time buyers and other lenders have similar products to help those looking to get a deal in the high loan to value area.

“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.”

Noye also highlighted that 14% of all mortgages completed using the scheme have not been by first-time buyers, suggesting there is a wider group of borrowers who are struggling with housing costs.

She continued: “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.”

interactive investor senior personal finance analyst, Myron Jobson, added: “For all the schemes and initiatives at wannabe homeowners’ disposal, for many, their dream of buying a property remains desperately out of reach because of a triple whammy of surging house prices and rising mortgage rates and the cost-of-living squeeze.
 
“The likelihood of higher interest rates to combat soaring inflation means that things are set to get tougher from an affordability perspective – with fast-rising rents offering no respite. However, rapidly climbing mortgage rates forcing home shoppers to back off a bit could be the undoing of the surge in property values. It could allow inventory levels to rise and, in turn, result in a transition to a market with lower levels of home price growth.”

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