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March 15, 2022Low take-up of the government’s Mortgage Guarantee Scheme has revealed that it has, so far, fallen short of expectations in helping first-time buyers get a foot on the property ladder, according to a property expert.
Mortgage Solutions reports that the scheme was introduced in April 2021 to encourage lenders to offer 95 per cent loan-to-value (LTV) mortgages and help get people to find their finest homes with less than a 10 per cent deposit.
However, figures released by HM Treasury show that only 6,535 mortgages were completed with support from the scheme up until the end of September last year, and of these, only 84 per cent of purchases were by first-time buyers.
Mortgages expert Karen Noye, from Quilter Financial Advisors, said that the figure paled in comparison to the number of first-time buyers hoping to get on the property ladder.
“This low figure exposes a scheme that is clearly not helping generation rent as much as hoped,” she said.
She added that the ‘incredibly high’ house prices were likely one reason why people were deciding against taking up the scheme and added that if property prices drop, and interest rates continue to rise, it won’t take much for homeowners to find themselves in negative equity.
This will mean that borrowers will be facing an uphill struggle if they want to see sell their homes at a later date, as they will also need to cover the negative equity to redeem the mortgage, moving costs, and a deposit for a new purchase.
“This could leave them trapped in their home until the market bounces back,” she warned.
She also pointed out that until there was more clarity on working practices following the lifting of COVID restrictions, potential buyers could be holding back from making “a big decision like buying a house”.
She said that once post-pandemic life is clearer, it could lead to more people looking to buy and therefore use the scheme, but added that the figures also showed that more people used the scheme from September onwards.
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Imran Bhatti
Imran created I.I Financial Services Ltd. in 2020 after working in the mortgage industry for over 10 years. His main reason for ‘going it alone’ was Imran’s unwavering desire to put his clients first. Imran has worked for large corporate companies as well as smaller independent brokers but what he loves is the personal customer experience. His clients are like his family. Imran loves a challenge and when faced with an unusual case he will find a way to satisfy the clients’ needs. Nothing is too difficult. Imran is a family man who devotes his spare time to his three children. Anyone who knows Imran would describe him as fun, with a great sense of humour, generous, caring and extremely professional. Once you have met Imran and experienced his service you will stay with him for life.
