The Help to Buy Mortgage Guarantee scheme will come to an end tomorrow and there are fears that its withdrawal could lead to a dramatic drop in activity in the first-time buyer mortgage sector.

The scheme acted as a catalyst for lenders to reintroduce mortgages at 95% LTV, bringing some normality back to the mortgage market.

“First-time buyers, regardless of if they used the scheme or not, have a lot to thank it for, as prior to the scheme borrowers would have struggled to find a deal that was not locals only or did not require a parent or guardian to guarantee the loan,” said Charlotte Nelson, finance expert at Moneyfacts.co.uk. “And even if they did manage to find a suitable deal, the cost of the repayments would have been high.”

Since the introduction of the scheme, the number of products has increased by 380% and the average two-year fixed rate has fallen below 4% for the first time on record.

However, many lenders are starting to withdraw deals for those with the smallest deposits, leaving first-time buyers at an increasing disadvantage when looking for a mortgage, as reflected by a sharp fall in the volume of deals available to those looking to buy with just a 5% deposit in recent months.

Nelson added: “Despite the boost to the market, it was often the case that the Help to Buy deals on offer were more expensive than the standard deals available.

“Only time will tell what the true effect of the removal of such a pivotal scheme will be. However, the growth we have seen in the past is starting to slow, perhaps showing signs of what is to come for first-time buyers.”