First Time Buyers

Mortage Guarantee Scheme used on just 1.6 per cent of all completions

Mortage Guarantee Scheme used on just 1.6 per cent of all completions
Christina Hoghton
Written By:
Christina Hoghton

Between April 2021 and September 2023, there were just 41,052 mortgage completions through the Mortgage Guarantee Scheme.

This represents only 1.6 per cent of completions in the UK during the same period.

The majority – 86 per cent – were purchases made by first-time buyers.

Since the last time the government published figures, there have been just an additional 1,864 completions under the scheme (from June until the end of September 2023).

The total value of the guarantees under the scheme is £1.1 billion while the overall value of loans supported by the scheme is £7.8 billion.

Karen Noye, mortgage expert at Quilter, said: “Despite its low take up, for those that have used it, it has been a lifeline.

“However, when we dive into the numbers, the average property purchased through the scheme is valued at £201,313, noticeably below the UK average house price of £291,000. This clearly shows the scheme’s focus on the more affordable segment of the housing market, with three-quarters of the properties bought valued at £250,000 or less.

“The scheme primarily attracts individuals and families with household incomes of £50,000 or less, underlining its appeal to those aiming to step onto the property ladder without hefty financial backing.

“But, there’s a significant hurdle: the borrowing limit, typically capped at 4.5 times one’s annual income. For many earning an average salary, this means they can borrow just a bit over £150,000, significantly limiting their choices in a tight housing market.”

What is the Mortgage Guarantee Scheme?

The Mortgage Guarantee Scheme launched on 19 April 2021 and is open to new accounts across the United Kingdom until 30 June 2025.

The scheme is used by lenders, so as a borrower a mortgage covered by the scheme is the same as one that isn’t under it.

It simply enables lenders to offer more 95 per cent mortgages to those with low deposits by mitigating some of their risk.

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 per cent.

The scheme can be used for mortgages on both new build and existing homes up to £600,000, and by first-time buyers, home movers and those remortgaging.

Average property values

The mean value of a property purchased or remortgaged through the scheme to the end of September 2023 was £201,313, compared to an average UK house price of £291,000.

The median property value is even lower at £176,000, reflecting that a higher proportion of properties in the scheme are in the lower value bands.

In fact, a quarter (24 per cent) of all mortgage completions through the scheme to date are on properties in the lowest value band up to £125,000, and a further 52 per cent are on properties between £125,001 and £250,000. Only 25 per cent of mortgage completions are on properties valued at over £250,000.

The majority of mortgage completions through the scheme to date are on terraced houses, making up 35 per cent of total completions. Flats or maisonettes accounted for 23 per cent, while completions for detached houses and bungalows were much lower, making up seven per cent and three per cent respectively.