Last month we had the first government data through regarding its guarantee scheme and the (very) early take-up of mortgages using it.
The figures – covering the period between April and September last year – show that 6,535 mortgages were completed using the scheme with 84% of those first-time buyers. The government estimates the value of mortgages supported by the scheme is over £1.2 billion, and it appears that in certain areas of the country – notably Scotland and the South East – there is a higher proportion of these guarantee-supported mortgages than others.
Some were quick to criticise what was perceived as a fairly low number of completions, with the suggestion that the scheme could not be deemed any sort of success because of this.
I’m afraid those criticising these early numbers are missing the point of the Scheme completely, and we might even be as bold to say that were there only to be a handful of mortgages completed, the very existence of the Scheme and what it generated within the market was worth the set-up alone.
This was, to my mind, all about delivering confidence and re-establishing a part of the market, high LTV mortgages, that were effectively going the way of the dodo prior to the guarantee scheme’s launch.
Anyone involved in this sector will know that in the months prior to March 2021 – when the Chancellor announced the scheme – we were scraping the absolute bottom of the barrel in terms of 95% LTV mortgages. There was a real danger that borrowers with low deposits and without any sort of parental support were being cut off from the property market for good.
Without government intervention I seriously doubt we would have seen any movement from lenders in this area of the market. The risk was seen as too high, even though there are products from the likes of Qualis which allow lenders to mitigate against such risks, and 95% LTV products numbered a handful at best, all requiring parental support.
That all changed the moment the scheme was announced. Indeed, within days, lenders who were not even active within the scheme were already launching 95% LTV mortgages and a sector within our market was resurrected almost overnight.
That has been the real benefit of the scheme and those criticising the numbers announced last month clearly fail to recognise what has happened across the wider market and the level of business being written outside of the scheme.
Plus, of course, this was indeed the first few months of the scheme and it would always take time to develop product offerings which were part of it.
What we can say is that it will be interesting to see just how many mortgages have been written since September, not just within the scheme but right across the market. We are not quite back to pre-Covid levels of 95% LTV mortgage product availability but we are certainly getting there, with many lenders opting for an insurance arrangement but a private one which gives them more flexibility and is more likely far cheaper than the Government scheme.
Those suggesting the scheme is not ‘attractive’ enough for potential first-time buyers are equally missing the point of why it was so necessary for the government to intervene and introduce it. Not only would we not have those initial 6,535 borrowers benefiting, but we would also (in all likelihood) not have the mortgage customers of those lenders who also launched 95% LTV products as a result of it.
That is thousands upon thousands of new first-time buyers who would not be in their homes now were it not for their ability to find a mortgage with a 5% deposit.
It is quite easy to launch brickbats at the government in all manner of areas, but in terms of supporting first-time buyers, the re-introduction of this guarantee scheme was a true ‘game changer’ and is worthy of huge kudos. It has paved the way for a market numbering hundreds of products and it has also given the high LTV market a very good chance of being an ongoing, sustainable element of many lenders’ propositions, even when it comes to an end.
That will be the true test – how sustainable will the high LTV market be after the scheme closes at the end of the year? A market has been made, now we want the industry to sustain it. This was never about the number of mortgages being completed under the Scheme but was all about the number of lenders it could convince to come back to the high LTV space. In that regard, it has been a huge success – long may it continue.
Patrick Bamford is head of international business development at Qualis Credit Risk, part of AmTrust International
