Mortgage guarantee scheme helps thousands to buy homes

Around 10,600 first time buyers were helped onto the property ladder by the mortgage guarantee scheme in the eight months following its launch, HM Treasury data shows.

The mortgage guarantee scheme was introduced in April 2021 to help boost the supply of 95% mortgages, which dwindled sharply during the pandemic. Lenders offering mortgages under the scheme are provided with a government guarantee that it will cover some of the lender’s losses if the borrower defaults on the mortgage within the first seven years of buying their property. The scheme is due to finish at the end of 2022.

According to HM Treasury, from the scheme launch up to the end of December 2021, a total 12,388 mortgages were completed, with a total value of £2.2 billion, and of these 86% were for first time buyers.

The majority of mortgage completions under the scheme were outside London and the South East, with the highest proportion of property completions in Scotland (24%) and North West (12%).

The average value of mortgages through the scheme, including both purchases and remortgages, was £189,804, compared to the national average house price of £274,712.
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Improving market for those with small deposits

According to research by Nationwide Building Society, 28% of first time buyers said that saving for a deposit was the biggest obstacle to owning a home.

“Building a deposit remains the single biggest barrier to homeownership today, with many people starting out facing a long uphill battle to save. The rising cost of living has made this even harder,” said Paul Archer, senior mortgage manager at Nationwide Building Society.

The good news is that since the introduction of the guarantee the number of mortgage options for first time buyers has steadily grown and many lenders now offer 95% deals for those with only a 5% deposit to put down, even when they may not be relying on the Government guarantee.

Although there are plenty of mortgages available to those with small deposits, it’s worth seeing whether you might be able to boost the amount you can put down, perhaps by saving for longer. The bigger the deposit you can afford, the wider the choice of mortgage options you’ll have at better rates, as lenders will consider you lower risk.