The UK government has revealed that 17,966 mortgages had been completed through its 95% loan to value (LTV) scheme at the end of March 2022.
The scheme, which was announced in March last year, provides buyers with the option to put down a 5% deposit on a home with a value of up to £600,000, to address the problem of higher-LTV mortgages disappearing from the market.
The data shows an increase compared to the period ending in December 2021 where there were 12,388 mortgage completions through the scheme.
The latest statistics show that completions from the scheme launch on 19 April to the end of March this year represented 6.5% of all residential mortgage completions in the UK.
Of the total completions, 85% were purchased by first-time buyers.
The report found that the corresponding value of the guarantees was £474m while the overall value of loans supported by the scheme was £3.2bn. The mortgages were used to finance properties worth £3.42bn in total.
The mean value of a property purchased or remortgaged through the mortgage guarantee scheme to the end of March this year was £190,166, compared to an average UK house price of £278,436.
Data found that 28% of all mortgage completions through the scheme to date were on properties in the lowest value band, and 67% were on properties worth £200,000 or less.
Only 21% of mortgage completions were on properties valued at £250,000 and above.
The majority of mortgage completions through the scheme were on terraced houses, making up 35% of total completions.
Flats or maisonettes made up 28% of completions, while completions for detached houses and bungalows equated to 7% and 3% of the total respectively.
Commenting on the latest data, Quilter mortgage expert Karen Noye says: “First-time buyers are continuing to face a whole host of issues, from ever-increasing house prices, inflation rapidly eating away at their deposits, and the rising cost of living disrupting their ability to save, all in conjunction with successive interest rate hikes. It is therefore somewhat surprising to see that the number of mortgages completed with the help of the government’s mortgage guarantee scheme remains relatively low.”
“However, while the take up has been modest at best, this is partly as a result of lenders identifying the gap in the market prior to the government’s implementation of the scheme and therefore offering their own 95% mortgage products.”
“The latest data shows 15% of all mortgages completed using the government scheme were not first-time buyers, showing the scheme is proving relatively popular among other borrowers. This may illustrate that it is not just first-time buyers who are struggling with the current housing costs and other financial pressures.”
Also commenting, Interactive Investor senior personal finance analyst Myron Jobson adds: “For all the schemes and initiatives for buyers, the growing mortgage affordability remains problematic. While the red-hot property market has come off the boil, with house prices falling last month for the first time since June 2021, albeit marginally, rising mortgage rates and the escalating cost of living crisis add further pressure on budgets.”
“With the ‘Bank of Mum and Dad’ also counting its pennies amid the cost-of-living crisis, many wannabe homeowners have been priced out of the property market.”
“The prospect of further interest rate rises to tackle rampant inflation, which would in turn raise mortgage rates, the increase in the energy price cap in Autumn along with the escalating broader inflationary pressures from food to car fuel, things are set to get tougher from an affordability perspective.”
Help to buy: equity loan scheme
The government also released the latest Help to Buy: equity loan scheme data today which revealed 5,395 properties were bought with an equity loan between 1 January and 31 March this year.
Help to Buy: equity loans were introduced on 1 April 2013 to help buyers purchase new build properties.
The government would provide, via an equity loan, up to 20% of the value of a property – and up to 40% in London since 1 February 2016 – which is repayable when the property is sold in the future.
In 2020, it was announced that the Help to Buy scheme would change on 1 April 2021 with new eligibility criteria and regional price caps.
The latest data represented a decrease of 65% from the same period the previous year and down by 48% compared to Q1 2019.
It also showed that 361,075 properties were bought with an equity loan between 1 April 2013 and 31 March 2022.
Up to 31 March, the total value of equity loans reached £22.5bn while the total value of properties sold under the scheme was reported as £100.8bn.
Jobson explains: While the Help to Buy ISAs have been usurped by the more generous Lifetime Isa, almost 17,450 property sale completions were supported by the initiative in the first quarter of this year – which isn’t an insignificant number. However, the average bonus of £1,149 barely covers home survey and legal fees as well as other costs associated with buying a property. But every little helps when it comes to buying a property.”
“There is now a dizzying array of ISAs available on the market – a simple tax wrapper has become complicated. For example, with the Lifetime ISA taking centre stage from the Help to Buy ISA, many savers who opened a Help to Buy ISA have seemingly forgotten they have one, with a great number of these ISAs sitting dormant and waiting to be brought back to life.”
Quilter’s Noye adds: “The majority of home buyers using the Help to Buy ISA scheme are aged between 18 and 34, with 65.3% aged between 25 and 34. The median age of a first-time buyer using the scheme remains at 28, two years younger than the average first-time buyer age across the market of 30.”
“While the schemes are well meaning, the figures reiterate just how few first-time buyers are actually supported by them. House prices have grown rapidly over the past couple of years, yet the mean value of a Help to Buy ISA purchase price remains at just £176,125 compared to an average first-time buyer house price of £231,704 and a national average house price of £278,436.”
“The latest Bank of England interest rate hike will only have served to worsen the position of already frustrated first-time buyers. Cheap mortgage rates have fast been pulled from lenders’ shelves, and first-time buyers will struggle to take that first step onto the housing ladder as they are further priced out of the market.”
“Ultimately, the government needs to plough its energy into building more housing stock as opposed to more schemes as this will truly get to the root of the issue.”
