A new poll has revealed that 15% of working-age people believe that the government’s mortgage guarantee scheme could apply to them. The study was carried out by price comparison site Nerd Wallet and there were 1,222 respondents aged between 18 and 54. The research also found that only 22% of young people (under 25 years old) believed the government’s scheme was relevant to them.
95% mortgage guarantee scheme
The government launched the 95% mortgage scheme on April 19 2021 to help more people onto the property market during the pandemic. The 95% mortgage guarantee scheme meant buyers only need a 5% deposit to secure a mortgage.
The scheme applies to all properties valued at up to £60,000, with the government promising to cover part of the losses a lender might incur if the borrower is unable to keep up with mortgage repayments. These mortgages are available from a variety of lenders including major high street banks to eligible applicants. The scheme will run until December 31 2022.
UK adults unaware of government schemes
The research also uncovered that 78% of working-age people feel that they do not have a good grasp of the full support available to help them get on the property ladder. Apart from the 95% mortgage scheme, other government initiatives to help young people get onto the property ladder include Help to Buy and Shared Ownership.
Richard Eagling, senior mortgages expert at NerdWallet, comments: “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.”
Eagling continues: “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.”
The new research also showcased other unawareness about mortgages among young people (between 18 and 34 years old), which could be fuelling misconceptions about how to get on the property ladder.
According to the study, 17% of under 35s understood that first-time buyers may not need to pay stamp duty. The poll also revealed 19% of respondents did not know that mortgage lenders can consider daily spending habits in mortgage applications. An additional 23% said that they would trust mortgage information from unofficial online forums, such as Quora, Yahoo Answers or Reddit.