The main reason quoted by then chancellor Rishi Sunak for introducing his earlier 95pc mortgage support scheme was to boost the homeownership sector by providing guarantees to lenders for offering 5pc deposit mortgages.
By any measurement it was a flop, being used on only 37,376 home purchases between its April 2021 launch and March 2023, according to government statistics. That’s about 1pc of purchases during the period.
Not happy with all the conditions that the Government had attached, lending institutions began offering their own 5pc deposit mortgages, rendering Sunak’s scheme largely redundant.
I guess we should be thankful it was not more effective as the main economic effect of such interventions if successful is to pump up demand even further, and thus increase house prices.
This puts housing out of reach of even more people – the opposite intention. Such schemes also do nothing to make mortgage payments more affordable and create additional risk of being trapped by onerous conditions that lock them into a mortgage they later cannot afford.
