Newly released government statistics on the impact of the Mortgage Guarantee Scheme reveal a total of 56,389 mortgages have been completed with the support of the scheme between 2021 and 2025.
The mean value of a property purchased or remortgaged through the scheme was £215,467, compared to a national average house price of £271,000. The vast majority of purchasers were first time buyers, who made up 86% of the total.
Under the original scheme, which closed to new accounts on the 30 June this year and was replaced by a new permanent scheme, lenders were offered the option to purchase a guarantee on mortgage loans if the borrower had a deposit of less than 10%. The scheme was used for mortgages on both new build and existing homes worth £600,000 or less and was not available for buy-to-let mortgages or second homes.
The figures have been met with sceptism by financial experts, with one calling them ‘lacklustre’ and ‘ineffective’. Holly Tomlinson, financial planner at financial services company Quilter, said the average property value illustrates regional inequalities in the scheme. She added:
“Mortgage completions supported by the scheme have been tailing off since it first launched, and while there seemed to have been a slight uptick in previous quarters which may have been driven by more people trying to push through completions ahead of the changes to stamp duty, the take up has still been relatively low.
“What’s more, the average property value under the scheme was £215,467, significantly below the national average house price of £271,000, which raises questions about the schemes ability to cater to those in mor expensive parts of the country.”
The new permanent scheme launched in July will enable eligible first time buyers and home movers to buy a home with a deposit as low as 5%. However, Tomlinson has questioned whether the move will have any significant benefits for borrowers.
She explained:
“While the government’s decision to make the Mortgage Guarantee Scheme permanent may help at the margin, it does not create homes or meaningfully lower borrowing costs. Without more supply and a clearer path on rates and taxation, the housing market could face a winter of discontent that drags into next year with even more people shut out.
“This is before you consider the other rumours circulating as we near the Chancellor’s budget which would risk further gluing up the market. One such rumour focuses on replacing stamp duty with a proportional property tax. While this would recognise that the current system is deeply flawed, there is a danger of creating new problems. Stamp duty has long deterred older homeowners from downsizing, and any new tax must avoid further locking up family homes at a time of acute shortage.”
A cap of £3.2 billion has been set on the size of the contingent liability of the new permanent scheme. In the scheme available between 2021 and 2025, the total value of mortgages supported was £11.5 billion – amounting to 1.4% of the total mortgage market over the same period.
