Govt Mortgage guarantee scheme

ended 17. February 2022

This morning, the Treasury published figures on how many people used the Government's mortgage guarantee scheme between April and September - around 6,500. A journalist at Thisismoney / Mail Online is keen to get opinions on why take-up has been so low.

  • Was the scheme overtaken by lenders offering their own 5% deals independently of the scheme?
  • Are FTBs worried about taking 5% mortgages in general due to negative equity?
  • Or are there other reasons?

She's also seeking views on Help to Buy Isa data, also out today, which said 604,720 bonuses have been paid through the scheme since 2015 (totalling £674 million) with an average bonus value of £1,115. The mean value of a property purchased through the initiative is £175,680 compared to an average first-time buyer house price of £225,607 and a national average house price of £269,945.

  • Given that the average bonus is quite small compared to the average house price. Is the scheme worth it? 

Deadline is 3pm today.

8 responses from the Newspage community

Star Quote
"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."
"The number of lenders using the scheme is quite low compared to how many potential lenders are out there. More to the point, we even had 5% deposit mortgages available before the scheme came out. Whilst it may have helped, I think a lot of the lenders that used it would have got there on their own eventually."
"Having spoken to various lenders who chose to "go it alone" and launch 95% LTV deals without the Government guarantee scheme, it simply came down to cost. The Government scheme was too expensive compared to taking the risk on themselves. Overall, buyers' take-up of 95% schemes has been mixed; we've had a long period of them being unavailable so many folks still think they need a 10% deposit, meaning they then wait until they have that before entering the market. For others the interest rate difference between a deal with a 5% deposit and a deal with a 10% deposit has seen them delay until they have the extra. This is not a solution open to everyone however. 95% LTV deals have a very important place in the market and many people would struggle to ever buy their own home without them."
"I think there were a couple of reasons the Mortgage Guarantee Scheme was a damp squib. Firstly, the main benefit was for lenders, not borrowers. And secondly, it was running alongside the much better known Help to Buy: Equity Loan Scheme. Ultimately, borrowers simply weren't as familiar with it."
"Many lenders were pretty savvy during this time and bought out their own 95% LTV deals before the MGS was 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."
The Government Mortgage Guarantee Scheme was a fantastic success. Yes, it sounded great and then went on to have hardly any take up, but that does not make it a failure. The aim was to stimulate borrowing for those with only a 5% deposit and it did. Mortgage lenders stepped up, offering their own 5% mortgage schemes, and at better interest rates. Hence the take up on the Government scheme was minimal, but ultimately for those with a small deposit, the intended result of access to a mortgage was achieved.
The Help to Buy ISA scheme it's absolutely worth it. When else will the government give you free money!? Especially when you remember its been coupled with the stamp duty exemption for first time buyers since 2017. Few first time buyers seem to have been solely reliant on the H2B bonus to make the purchase happen but it certainly can cover a big part of the legal fees when buying a house which need funding beyond the deposit.
The government's mortgage guarantee scheme has failed to take off as in reality, it was juts a headline grabbing gimmick. Borrowers can already obtain mortgages with 5% deposit hence for most first time buyers, the scheme has little use. The Help to Buy ISA did benifit some first time buyers but as expected, the bonus had little significance for those that used it.