The number of completions through the Help to Buy Mortgage Guarantee scheme dropped by 38% between the last quarter of 2015 and the first quarter of 2016, figures from the Treasury have shown.
And with the scheme set to end this year there are now concerns that high loan-to-value lending could dry up.
Patrick Bamford, business development director for AmTrust International, Mortgage and Special Risks, said: “It is concerning to see the number of Help to Buy Mortgage Guarantee (HTB2) completions fall so drastically from Q4 2015 to Q1 2016, a drop of 38%.
“The government scheme has proved instrumental in aiding first time buyers fulfil their dreams of home ownership – since the scheme began, 79% of transactions have been first time buyers – by supporting those with small deposits and providing a much-needed boost to high loan-to-value lending.
“However, the scheme is due to end this year and there are very real concerns that this will cause a sharp decline in high LTV lending. We have already seen worrying signs that the growth in lending to those with smaller deposits triggered by the scheme is already on the wane.
“The uncertainty caused by the Brexit referendum result means banks will be reviewing their mortgage risk appetite. This, combined with the end of the Help to Buy scheme, risks creating a perfect storm for lending to first time buyers with small deposits, which could have a significant impact on the broader property market.
“It is crucial the mortgage market establishes a long-term supply of high LTV loans to support the many first time buyers who are unable to save large deposit sums but want to buy their own home. Adopting private mortgage insurance would provide lenders with the protections they need while supporting home ownership through the provision of high LTV mortgages.”
Since the launch of the Help to Buy: mortgage guarantee, 78,749 mortgages have been completed with the support of the scheme.
Of these, 79% were purchases by first-time buyers with the total value of mortgages supported by the scheme standing at £11.6bn.
According to the Treasury’s figures the scheme has had the biggest impact in the North West and Scotland.