Between April and September 2021 6,535 mortgages worth a total of £1.2bn have been completed through the mortgage guarantee scheme.
Of these 84% were for purchases by first-time buyers. The South East and Scotland were the main regions to benefit from the scheme.
The mean value of a property purchased through the scheme was £196,702 – significantly less than the average house price in the UK of £269,945.
The 2021 mortgage guarantee scheme opened on 19 April 2021 and is available across the United Kingdom until 31 December 2022. The last set of figures on the scheme showed an uptake of 812.
Under the scheme, the government offers lenders the option to purchase a guarantee on mortgage loans where the borrower has a deposit of less than 10%.
The scheme can be used for mortgages on both new build and existing homes, and by first-time buyers, home movers and those remortgaging.
Karen Noye, mortgage expert at Quilter, said: “The first set of data about the mortgage guarantee scheme was disappointing with just 812 mortgages using the scheme but this was understandable given it had only been in play for a matter of months and many buyers may have not even completed yet.
“However, the most recent set of data, which looks at the six months from April to September, shows that just 6,535 mortgages have been completed using the scheme.
“This pales in comparison to the number of first-time buyers looking to get a foot on the property ladder.
“This low figure exposes a scheme that is clearly not helping generation rent as much as hoped. With house prices remaining incredibly high there are a number of reasons why people may be opting to not take advantage of the scheme.
“Firstly, if house prices do drop, as is predicted this year now that interest rates are on the rise and the stamp duty holiday is gone, it doesn’t take much for new homeowners to find themselves in negative equity.
“This will mean borrowers will face an uphill struggle if they want to sell their homes as they will need to cover all the negative equity to redeem the existing mortgage, moving costs and a deposit for the new purchase. This could leave them trapped in their home until the market bounces back.
“Secondly, we are at an interesting juncture where restrictions from Covid look set 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 be waiting to see how their working life evolves before they make a big decision like buying a house. Once people’s post-pandemic life is more clear there may be more people looking to buy and therefore use the scheme.
“The data does show that the number of people using the mortgage guarantee scheme picked up in September so future releases may show more people taking advantage of 95% LTV mortgages. However, for the moment the scheme does not look to be the success the government might have hoped.”
