This is according to research by NerdWallet which also found only 15% of working age people believed the government scheme to help buyers who needed to borrow 95% of their property’s value, did not apply to them.
The poll of 1,222 adults aged between 18 and 54 also found only one in five (22%) young people (under 25 years old) believed the scheme could be relevant to them.
The government’s mortgage guarantee scheme, announced in the 2021 Spring Budget, helps first-time buyers and home movers to secure a mortgage with a deposit as small as 5%.
The scheme is available to purchase homes valued at up to £600,000, with the government promising to cover a portion of the losses a lender might incur in the event of a borrower failing to repay the mortgage.
Many lenders, including major high street banks, are currently offering mortgages to eligible buyers with just a 5% deposit. Some are available under the Mortgage Guarantee Scheme and others are independent of the initiative.
But this latest research has cast doubt over the number of people who may take advantage of the scheme.
Indeed, last month mortgage broker Trussle revealed only 1% of mortgage completions it recorded in July were made using a 95% deal. It suggested one of the reasons for this was that many people were being rejected for the deals.
But the latest research by NerdWallet also found 78% of working age people felt they did not have a good grasp of the full support available to help them get on the property ladder.
Richard Eagling, senior mortgages expert at NerdWallet, said: “While government-backed 95% mortgages have been welcomed by many, our research suggests that its benefits may not yet be widely known among potential buyers.
“Although not right for everyone, the scheme is a significant development for those who would otherwise be unable to put down a larger mortgage deposit – meaning that many who are unaware of it could miss out on getting a foothold on the property ladder.
“Building a decent deposit is one of the biggest challenges home buyers face, and this has only become more difficult as house price growth has rocketed over the last year.
“Mortgages that are offered at 95% loan-to-values are something of a lifesaver for many borrowers, but if the new mortgage guarantee scheme is going to succeed then more needs to be done to raise awareness of how it works and who could be eligible.”
Other options
There are a number of other government-backed schemes designed to help young home movers and first-time buyers, such as Help to Buy and Shared Ownership.
NerdWallet’s research study also highlighted other important knowledge gaps about mortgages among young people (between 18 and 34 years old), which could be driving misconceptions about how to get on the property ladder.
For example, just 17% of under-35s understood that first-time buyers may not need to pay stamp duty.
Meanwhile, 19% did not know that mortgage lenders can consider day-to-day spending habits in mortgage applications.
A further 23% said that they would trust mortgage information from unofficial online forums, such as Quora, Yahoo Answers or Reddit.
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