As the curtain was set to close on 2023, the UK government’s mortgage guarantee scheme saw a slight increase in use. According to HM Treasury, the final quarter of 2023 recorded 1,784 mortgage completions under this scheme, contributing to a total of 42,836 since its inception in April 2021. This figure represents 1.3% of all residential mortgage completions in the UK during the same timeframe.
Continued Support for First-Time Buyers
A significant portion of the scheme’s users are stepping onto the property ladder for the first time, with first-time buyers making up 85% of the purchases. The scheme has been crucial in aiding these new homeowners, especially considering the rising challenges in the housing market.
Financial Details of the Scheme
The total value of the mortgages issued under this initiative amounts to £8.2 billion. These funds have facilitated the acquisition of properties valued collectively at £8.7 billion, with the government providing guarantees worth £1.2 billion. Despite its benefits, December 2023 saw the scheme’s lowest monthly uptake, with only 498 completions.
Affordable Home Purchases
The scheme predominantly supports the purchase of lower-priced homes. The average property value among these transactions was £202,713, which is notably lower than the average UK house price of £284,691. Properties valued between £125,001 and £250,000 constitute 52% of all purchases made through the scheme, indicating its appeal to those buying moderately priced homes. Terraced houses are the most common type of property bought, followed by semi-detached houses and flats or maisonettes.
Income Analysis of Borrowers
Household income data reveals that less than half of the borrowers earn up to £50,000 annually, with the average household income of scheme users at £55,384. Those earning between £40,001 and £50,000 represent the largest segment of borrowers, emphasising the scheme’s reach to middle-income families.
Geographical Trends in Usage
The scheme’s impact varies significantly across the UK. Scotland leads with 22% of all scheme completions, which is a substantial overrepresentation compared to its 9% share of all UK mortgage completions. England follows, with significant use in the North West and South East regions. On the other hand, London and Northern Ireland have seen much lower uptake, with only 4% and 3% of completions respectively.
Looking Forward
Originally set to conclude at the end of 2023, the scheme’s life has been extended to June 30, 2025, as announced in the last Autumn Budget. This extension provides a continued opportunity for potential homeowners, especially first-time buyers, to cope with the increasingly challenging housing market with some government backing.