Government 95% mortgage guarantee figures released, increased uptake anticipated

A total of 24,153 mortgages were completed with the support of the Government’s 95%. mortgage guarantee scheme between April 2021 and June 2022, according to HM Treasury data.

The relatively low uptake of the scheme appears to be down to lenders spotting the gap in suitable products before the Government launched the scheme.

However, there has been a modest increase in usage this year. Between April 2021 and March 2022 a total of 17,996 mortgages were completed using the scheme. But the first three months of its second year saw 6,157 completions.

Karen Noye, mortgage expert at Quilter, predicts there could be an increase in usage as the market adapts to recent setbacks.

She said: “First-time buyers have faced a difficult battle in recent years, from soaring house prices, inflation rapidly eating away at their deposits, and the current cost of living crisis putting a dampener on their ability to save – all in conjunction with growing mortgage rates that make monthly repayments increasingly unaffordable. 

“Given the struggle first-time buyers face, it is rather surprising that the number of mortgages completed with the help of the Government’s mortgage guarantee scheme remains relatively low – with just 24,153 mortgages completed between April 2021 and June 2022.

“While use of the scheme is relatively low, it is seeing a gradual uptick in popularity. In its first full year – April 2021 to March 2022 – a total of 17,996 mortgages were completed with the support of the scheme.

“In comparison, in just the first three months of its second year – April to June 2022 – a total of 6,157 were completed.

“However, while the take up has been modest at best so far, this is partly as a result of lenders identifying the gap in the market prior to the Government’s implementation of the scheme and therefore offering their own 95% mortgage products.

“Given lenders are now tightening their offerings and many have reduced or removed the high loan to value mortgages they offer, we could see a further uptick in the use of the government scheme as more people are forced to rely on it.

“The latest data shows 15% of all mortgages completed using the government scheme were not first-time buyers, showing the scheme is still proving relatively popular among other borrowers.

“This may illustrate that it is not just first-time buyers who are struggling with the current housing costs and other financial pressures, and this could increase as the cost-of-living crisis takes a firmer hold.

“Interest rates have risen rapidly, and people’s finances are beginning to look less stable against the cost-of-living backdrop.

“As such, lenders may begin to take more 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 to 80% of the purchase value of the guaranteed property covering 95% of these net losses.”