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More than 800 government-backed 95 per cent mortgages completed in Q2

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Written by: Shekina Tuahene
03/12/2021
The scheme boosted supply of mortgages for borrowers with just a five per cent deposit
More than 800 government-backed 95 per cent mortgages completed in Q2

Some 812 mortgages were completed through the government’s 95 per cent loan to value (LTV) scheme in the first few weeks of its launch, government figures show.

Statistics from the Treasury revealed that no mortgages were completed using the initiative between its introduction on 19 April and the end of that month.

In May, there were 51 completions and in June the figure rose significantly to 761. Overall, mortgages completed through the scheme represented 0.7 per cent of the market at the time.

The Treasury said this was expected due to “the infancy of the scheme at this point in time and the average length of time to complete a house purchase”.

During the period, a total of £185m was lent against properties worth a combined £196m.

The scheme launched through a small cohort of primarily mainstream lenders, including Lloyds, NatWest, Santander, Barclays, HSBC and Virgin Money. It was intended to address the lack of 95 per cent mortgage deals available at the time, resulting from lenders being restrictive towards borrowers who were deemed high risk.

Some 82 per cent of the loans were provided to first-time buyers and properties worth up to £125,000 accounted for the largest share of completions at 24 per cent.

Homes at a value between £350,001 to £500,000 came second, accounting for 18 per cent of mortgages.

The average value of a home purchased through the scheme came to £240,993, compared to an average UK house price of £265,668 in June.

The majority of borrowers had household incomes up to £20,000, making up a 27 per cent share of completions. People with household incomes of 30,001 to £40,000 and those with incomes of £60,001 to £80,000 individually took up 12 per cent of completions, the second largest proportions apiece.

While taking up a smaller share, mortgages given to those with incomes of £60,001 to £80,000 amounted to 101 completions, just under half of the 222 mortgages provided to those with the lowest household income.

The average income of those using the scheme was £47,465.

Karen Noye, mortgage expert at Quilter said: “While just over 800 examples of people using the scheme seems low, the quarterly statistics only cover from April to June with it taking some time for lenders to bring out new products as part of the scheme and then house purchases to complete.”

Noye warned that because purchases were made during a house price boom, buyers were at risk of falling into negative equity.

“While once again this scheme is clearly well-meaning, its range of flaws have meant that it has not been anywhere near as successful as it could have been,” she added.

She also noted the record number of Help to Buy sales reaching a high of 60,634 in the 12 months to June potentially subduing take up.

Noye said: “Against a backdrop of other government backed products like the Lifetime ISA (LISA) many savers struggled to work out which option to go for and when faced with this difficult choice often opted to sit on their hands.”

She said the similarities between schemes available to first-time buyers muddied the water and was “not helpful for first-time buyers who may already be overwhelmed by what is a complicated process.

“With the 95 per cent scheme now also in play its more crucial than ever that first time buyers do their homework and assess whether buying at this moment of time is the best option for their long-term future.”

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