On Saturday 31st December the help-to-buy mortgage guarantee scheme came to an end. The closing of one of the government’s flagship home ownership programmes has attracted a wide range of views (1).
The Council of Mortgage Lenders estimates that the help-to-buy mortgage guarantee scheme is likely to have helped more than 100,000 buyers buy a home (2). They described the scheme as having worked “exceptionally well” in increasingly the availability of mortgages. The charity Shelter takes a different view and suggests that the scheme actually led to an increase in housing prices (2).
The government scheme allowed borrowers with a small 5% deposit get a mortgage and also guaranteed the payments for a 7 year period for situations where the borrowers were unable to make payments (1).
As of September 2016, only two home-owners had defaulted on their mortgages so only £17,411 (2) has been needed from government coffers to compensate mortgage lenders. This figure is likely to increase sharply when interest rates eventually rise so the total cost of the scheme won’t be known until June 2023.
Since the scheme launched in 2013 there has been a notable increase in banks or building societies offing similar loan-to-value loans. This changing mortgage picture led the Bank of England to decide that the guarantee scheme was no longer necessary (3).
Bank Governor Mark Carney and the Chancellor, Philip Hammond, said the mortgage market had become less reliant on the help to buy mortgage guarantee, with over 30 lenders offering low deposit mortgages independently of the scheme (1). However the help-to-buy equity loan scheme for new-build homes will remain on offer until 2020. (2)
Your home may be repossessed if you do not keep up repayments on your mortgage.