But mortgage experts say it does not tackle the root cause of the housing crisis and more must be done to support those struggling to get on or up the property ladder.
Introduced in April 2021 the initiative aimed to provide mortgages for borrowers with low deposits of between 5% and 10% thanks to a government guarantee on the loan.
It’s open to first-time buyers, movers and remortgagers who apply through lenders which have signed up to the scheme. Lloyds, Barclays and HSBC are among those who provide loans through the Mortgage Guarantee Scheme (MGS).
The scheme was due to end in June 2025, but the new Labour government has pledged to extend and enhance the initiative under the new guise of ‘Freedom to Buy’.
Today the Treasury unveiled data showing, since launch and up to June this year, 45,775 mortgages were completed using the scheme.
Of these 87% were first-time buyer purchases and the higher proportion of mortgages were being taken out for properties in the North West, South East and Scotland but a lower percentage in London and Northern Ireland.
The average value of properties purchases or remortgaged 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 faced first-time buyers and underscored why Labour’s Freedom to Buy proposal risked falling short of addressing the root causes of the housing crisis.
She added: “The average property value under the scheme was £204,716, significantly below the national average, raising questions about its ability to cater to those in more expensive parts of the country.”
Noye said the Freedom to Buy scheme was ‘well-meaning’ but did little to tackle the core problem of high house prices relative to wages, which continued to put homeownership 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 should house prices fall—a real concern in a volatile market. Schemes like these are more of a sticking plaster than a solution, helping only a fraction of buyers while doing nothing to address the broader affordability crisis.”
How the Mortgage Guarantee Scheme works
The Mortgage Guarantee Scheme involves the government taking on the risk of a lower deposit mortgage. The aim is to increase the availability of mortgages to those with 5% to 10% cash.
The borrower will apply for the loan as normal. The difference is, behind the scenes, the government will guarantee a proportion of the loan over 80% – it’s essentially taking on the risk in case there’s a shortfall if your home is repossessed or falls into negative equity.
It’s available on properties – both new build and older – of £600,000 or less. You cannot purchase a buy-to-let or second home using the scheme.
