10 August 2022
If you are covering the latest government data on the 95% mortgage guarantee scheme or the Help to Buy Equity Loan and ISA scheme data, please see the following comment from Rosie Hooper, chartered financial planner at Quilter:
Data on 95% mortgage guarantee scheme:
“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, with just 17,996 mortgages completed between April 2021 and March 2022.
“The scheme, which should be acting as a lifeline for those struggling to get on the housing ladder, saw an uptick in popularity in the second half of its first year with 11,461 deals being completed in the six months of October to March 2022 compared to just 6,535 in the six months of April to September 2021. 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. For example, Nationwide offers a helping hand product, which boosts the borrowing power of first-time buyers and other lenders have similar products aimed at helping those looking to secure a deal in the high loan to value area. Additionally, the low take up may be as a result of the ‘Bank of Mum and Dad’ stepping in to boost first-time buyer deposits to enable them to take out lower LTV deals.
“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.
“Interest rates have continued to increase, and as people’s finances begin to look less stable against the cost-of-living crisis backdrop, lenders may begin to take more advantage of the scheme which would compensate participating mortgage lenders for a portion of net losses suffered in the event of a repossession. The guarantee applies to 80% of the purchase value of the guaranteed property covering 95% of these net losses.”
Data on Help to Buy schemes:
“This morning’s Help to Buy ISA statistics show that since its inception, the scheme has supported 497,940 property completions, up 17,446 on the previous quarter. The Help to Buy Equity Loan scheme statistics on the other hand, show that the scheme has supported 361,075 property completions since its 2013 inception, 5,395 of which completed between 1 January and 31 March 2022 – down 65% compared to the same period in 2021.
“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.”
