The Mortgage Guarantee Scheme, which helps homebuyers with a low deposit purchase a home, has helped complete more than 45,000 mortgages since its launch, new data shows.
But mortgage experts say this does not address the root cause of the housing crisis and more must be done to support those struggling to get on the property ladder.
Introduced in April 2021, the initiative aimed to provide mortgages to borrowers with low deposits between 5% and 10% thanks to a government guarantee on the loan.
It is open to first-time buyers, movers and remortgages who apply through lenders who have joined the scheme. Lloyds, Barclays and HSBC are among those providing loans through the Mortgage Guarantee Scheme (MGS).
The scheme was due to expire in June 2025, but the new Labor government has pledged to expand and strengthen the initiative under the new guise of ‘Freedom to Buy’.
Today, the Treasury revealed data showing that 45,775 mortgages have been taken out using the scheme since its launch and up to June this year.
Of this 87% were first-time buyer purchases and the majority of mortgages were for properties in the North West, South East and Scotland, but a lower percentage in London and Northern Ireland.
The average value of property purchases or remortgages through MGS was £204,716 – much lower than the national house price average of £288,000.
Karen Noye, mortgage expert at Quilter, said the data highlighted the challenges first-time buyers face and underlined why Labour’s Freedom to Buy proposal risked falling short in tackling the root causes of the housing crisis.
She added: “The average property value under the scheme was £204,716, significantly lower than the national average, raising questions about its ability to cater to people in more expensive parts of the country.”
Noye said the Freedom to Buy scheme was “well intentioned” but did little to tackle the core problem of high house prices relative to wages, putting home ownership out of reach for many.
She added: “The reliance on 95% loan-to-value mortgages leaves buyers with minimal equity, increasing the risk of negative equity as house prices fall – a real concern in a volatile market . These types of schemes are more of a band-aid than a solution; they help only a fraction of buyers, while doing nothing to address the broader affordability crisis.”
How the Mortgage Guarantee Scheme works
With the Mortgage Guarantee Scheme, the government assumes the risk of lower mortgage interest rates. The goal is to increase the availability of mortgages for people with 5% to 10% cash down.
The borrower will apply for the loan as usual. The difference is that behind the scenes the government guarantees part of the loan of more than 80%. In effect, she assumes the risk if a shortfall arises if your home is foreclosed or falls into negative equity.
It is available for properties – both new build and older – of £600,000 or less. You cannot buy a rental purchase or second home with the scheme.