"This pales in comparison to the number of first-time buyers looking to get a foot on the property ladder."
HM Treasury data, published today, shows that between April and September 2021, 6,535 mortgages have been completed using the scheme.
Of these, 84% were purchases by first-time buyers, and the government estimates that the total value of mortgages supported by the scheme is £1.2 billion.
Compared to total mortgage completions in each region, the scheme has supported a higher proportion of mortgages in the South East and Scotland, and a lower proportion in London, the North East and Northern Ireland.
Research published in September found that just 15% of aspiring homeowners were aware of 95% LTV mortgage scheme.
Karen Noye, mortgage expert at Quilter, commented: "The first set of data about the mortgage guarantee scheme was disappointing with just 812 mortgages using the scheme but this was understandable given it had only been in play for a matter of months and many buyers may have not even completed yet.
"However, the most recent set of data, which looks at the six months from April to September, shows that just 6,535 mortgages have been completed using the scheme. This pales in comparison to the number of first-time buyers looking to get a foot on the property ladder.
"This low figure exposes a scheme that is clearly not helping generation rent as much as hoped. With house prices remaining incredibly high there are a number of reasons why people may be opting to not take advantage of the scheme. Firstly, if house prices do drop, as is predicted this year now that interest rates are on the rise and the stamp duty holiday is gone, it doesn’t take much for new homeowners to find themselves in negative equity. This will mean borrowers will face an uphill struggle if they want to sell their homes as they will need to cover all the negative equity to redeem the existing mortgage, moving costs and a deposit for the new purchase. This could leave them trapped in their home until the market bounces back.
"Secondly, we are at an interesting juncture where restrictions from Covid look set to be gone for good, but the ways of working adopted during the pandemic remain. With some companies forcing people back to their desks and others taking a more hybrid approach some workers will be waiting to see how their working life evolves before they make a big decision like buying a house. Once people’s post-pandemic life is more clear there may be more people looking to buy and therefore use the scheme.
"The data does show that the number of people using the mortgage guarantee scheme picked up in September so future releases may show more people taking advantage of 95% LTV mortgages. However, for the moment the scheme does not look to be the success the government might have hoped."
Paul Neal of Derbyshire-based Missing Element Mortgage Services said: "Many lenders were pretty savvy and brought out their own 95% LTV deals before the Government's Mortgage Guarantee Scheme was even introduced. As ever with Government schemes, it's a simple case of not enough and too late. Also, the majority of the lenders offering it only made it available to those who had very good credit, which instantly excludes many first time buyers."
Rhys Schofield, managing director at Peak Mortgages and Protection, added: "It's pretty simple why the numbers are so low. The scheme was floated with much bluster earlier on in the pandemic and by the time it was actually up and running several months later most lenders were offering 5% deals anyway outside the scheme without the government hoops and costs for the lender to jump through."
