Will the Bojo mortgage fill the hole in purchase assistance?

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Monday, May 23, 2022 3:15 p.m.

The so-called Mortgage Guarantee Scheme (MGS), Bojo Mortgage, is a more comprehensive version of the Purchase Assistance Scheme, allowing lenders to buy collateral on mortgages for those with less than 10% deposit.

Launched in April last year, it can be used on new and existing homes by first-time buyers, mortgages and movers.

However, it is not open to buy-to-let, second homes or properties with a market value over £600,000.

But how has it been received and how does it compare to the popularity of the Help to Buy crowdlending program?

Research by estate agent comparison site GetAgent.co.uk has revealed how MGS has fared so far and how that performance compares to the existing Help to Buy equity loan scheme.

Acceptance vs purchase assistance

Since the second quarter of 2021, 12,388 sales have been made using the scheme, with the value of these loans exceeding £2.2bn, fueling nearly £2.4bn of property purchases.

Over the same period, the Help to Buy equity loan scheme assisted 27,112 transactions with £1.9bn of equity loans facilitating £7.9bn of property sales.

However, Help to Buy has been established for much longer in its various guises and when comparing the success of MGS to the early days of the Help to Buy crowdlending program, adoption is much more similar.

In fact, when Help to Buy first launched in 2013, it helped just over 14,000 shoppers get on the ladder, while MGS helped nearly 13,000 shoppers.

Differences across the UK

So where is homebuyers’ appetite for MGS strongest?

So far, 24% of the 12,388 transactions to be completed with MGS assistance have been located in Scotland.

The North West also had a high percentage of MGS completions at 12%, as did the South East at 10%.

Northern Ireland (3 percent) and London (4 percent) represent the lowest level of MGS transactions.

Although it is open to all buyers, 86% of all completions going through the MGS have been first-time buyers.

First time buyers

While London may be home to one of the lowest levels of MGS transactions, 92% of those using the scheme in the capital are first-time buyers.

“Home prices have reached record highs during the pandemic so it’s fair to say homebuyers across the country need all the help they can get, especially first-time buyers,” Colby said. Short, founder and CEO of GetAgent.co.uk.

Discuss findings with AM City Today, Short said that “the government’s latest attempt to provide this assistance certainly appears to be serving a purpose, helping a similar level of transactions to the share purchase assistance program in its early stages, whose majority were first-time buyers. ”

The question is, are government programs designed to fuel demand without tackling supply really the answer?

“We’ve seen how this approach through the original purchase assistance program ironically pushed house prices even further out of reach for the average person,” Short said.

“Now we have two such programs working together, at a time when property values ​​are already rising at an alarming rate.”

“Surely a cohesive approach to building more homes would be a much more sustainable way to address long-term affordability?” In short concluded.

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