Despite soaring house prices and rising interest rates, government statistics show that only 12,388 mortgages have been taken out since the program launched in April 2021 through December 31, 2021, with a total value mortgage loans of £2.2 billion.
Karen Noye, Mortgage Expert at Quilter, said: “First-time buyers are currently facing a disastrous series of problems having suffered from steadily rising house prices, inflation eating away at their deposits, an increase in the cost of living disrupting their ability to save and maintaining successive increases in interest rates. It is therefore somewhat surprising to see that only 12,388 mortgages have been concluded with the help of the mortgage guarantee scheme, which should act as a lifeline for those struggling to access the housing ladder.
“The popularity of the program has now increased with approximately 5,853 additional transactions completed in the three months of October to December 2021, compared to 6,535 in the six months of April to September.
“However, part of the reason uptake has been modest at best is that lenders saw the gap in the market long before the government offered the program and started offering their own mortgage products to 95%. For example, Nationwide has an assistance product, which increases the borrowing power of first time buyers and other lenders have similar products to help those looking to secure a deal in the high value loan area.
“Another potential reason for the low turnout is that first-time buyers face such an uphill struggle to get on the housing ladder that ‘Mom and Dad’s Bank’ plays a huge role in driving up first-timer deposits. buyers allowing them to exit lower LTV offers.
“Interestingly, 14% of all mortgages taken out using the government program are non-first-time buyers, showing that it is proving relatively popular among other borrowers, which may illustrate that it’s not just first-time buyers who are grappling with housing costs.
“As interest rates rise and people’s finances seem less stable amid a cost-of-living crisis, lenders may start to take advantage of the scheme that would compensate participating mortgage lenders for some of the net losses incurred. in the event of repossession The guarantee applies up to 80% of the purchase value of the guaranteed property covering 95% of these net losses.
This morning’s Help to Buy ISA statistics show that since its inception the program has supported 480,494 property completions, up 19,927 from the previous quarter. On the other hand, statistics from the Help to Buy Equity Loan program show that the program has supported 355,634 property completions since its inception in 2013, including 8,913 completed in the last quarter of 2021, a decrease of 41% compared to the same period in 2019.
The majority of homebuyers using the Help to Buy ISA program are between 18 and 34 years old, with 65.3% being between 25 and 34 years old. The median age of a first-time buyer using the program remains at 28, two years younger than the average age of first-time buyers in the market is 30. Although the programs are well-intentioned, the numbers show how few first-time buyers are actually supported by them. House prices have risen significantly over the past two years, but the average value of a purchase aid purchase price remains at just £175,849 compared to an average first-time buyer’s price of £228,627 and at a national average price of £274,712. .
“First-time buyers’ frustrations are still widely felt, and recent interest rate hikes by the Bank of England have only made their position worse,” Noye said. “Cheap mortgage rates are quickly a thing of the past, and first-time buyers will again struggle to make that first step on the housing ladder as they are out of the market.
“What’s more, home prices have continued to rise for much longer than originally expected, leaving first-time buyers playing cat and mouse. Just as they manage to save enough for a deposit, the cost of their first home is once again out of reach. The government needs to put its energy into building more housing rather than more programs because that will really get to the root of the problem.
The total value of Help to Buy: Equity Loan is £22 billion and the value of properties sold under the scheme totals £99 billion.
Housing Minister Stuart Andrew MP said: “Giving everyone the opportunity to own their own home is at the heart of our Upgrading mission – to spread opportunity and prosperity equally across the country. It’s fantastic that this milestone has been reached on the day we introduce our Leveling and Regeneration Bill which outlines our plans to deliver more homes and give everyone the opportunity to own their own home.
“Along with other government initiatives such as the mortgage guarantee scheme, Help to Buy has driven the annual number of first-time buyers to a 20-year high.”
Homes England chairman Peter Freeman added: “It’s great to see the impact Help to Buy has had so far. Thanks to the equity loan, more than 350,000 young people and families, many of whom are first-time buyers, have now been able to buy their own homes.
The new Home Buyer: Equity Loan for First-Time Buyers started April 1, 2021 and will continue to help thousands more people become homeowners through March 2023.
“Buyers can borrow up to 20% of the cost of new build (40% in London), finance the balance via a mortgage and repay the loan when they sell. Homeownership assistance is just one way the government is making homeownership more accessible and affordable. Condominiums, first houses and the mortgage guarantee system help many more people to access their own housing. »